Sony Music Entertainment India Private Limited, 4th Floor, 92 Main Avenue, Linking Road, Santacruz West,Mumbai. Vs. Addl. Commissioner of Incometax- Range 15(2),Mumbai.
July, 20th 2012
IN THE INCOME TAX APPELLATE TRIBUNAL " E " BENCH, MUMBAI
BEFORE SHRI DINESH KUMAR AGARWAL, JM AND
SHRI B. RAMAKOTAIAH, AM
./I.T.A. No. 6569/Mum/2010
( / Assessment Year 2005-06)
Sony Music Entertainment Addl. Commissioner of Income-
India Private Limited,
Vs. tax- Range 15(2),
4th Floor, Mumbai..
92 Main Avenue,
./PAN : AAICS1766Q
( /Appellant) .. ( / Respondent)
/Appellant by : Shri Sunil M. Lala
Shri Varun Sankhesara
/Respondent by : Shri Baban D. Patil
/Date of Hearing : 9-7-2012
/Date of Pronouncement : 18-7-2012
/ O R D E R
PER DINESH KUMAR AGARWAL, J.M.
This appeal preferred by the assessee is directed against the order dated
16-6-2010 passed by the ld. CIT(A)- 20, Mumbai for the assessment year 2005-
2. Briefly stated facts of the case are that Sony BMG Music Entertainment
Pvt. Ltd. was incorporated on 2-6-2004. It is a private limited company and
commenced business w.e.f. 1-12-2004, The company carried recorded music
business by exploiting the music and video rights in audio and video softwares
viz. Audio Cassets, Audio compact discs, video compact discs, digital
downloads, ring tones, broadcasting and various other forms of exploitation.
The company has its registered office located in Mumbai and regional sales
offices located in Mumbai, Bangalore, Kolkatta and New Delhi. The return was
filed showing a loss of Rs. 3,41,12,060/- inter alia claiming deduction of
provision for stock obsolescence written back Rs. 1,13,91,166/-. However, the
A.O. without considering the said claim completed the assessment at a loss at
Rs. 2,23,72,681/- vide order dtd. 28-11-2007 passed u/s 143(3) of the Income
Tax Act, 1961, (the Act). On appeal the ld. CIT(A) while observing that no
relevant information is available on record in support of the claim, declined to
interfere with the assessment made by the A.O.
3. Being aggrieved by the order of the ld. CIT(A) the assessee is in appeal
before us taking the following ground of appeal:-
"On the facts and circumstances of the case and in law, the learned
Commissioner of Income-tax (Appeals) 20 [`CIT (A)'] has erred in accepting the
learned Additional Commissioner of Income Tax's order and treating the
provision for stock obsolescence written back amounting to Rs. 11,391,166/- as
income taxable in the hands of the Appellant inspite of all the relevant
information and detailed responses filed before the learned CIT(A) in support of
its claim that the provision was already disallowed in preceding assessment
years and hence cannot be chargeable to tax in hands of the appellant again in
the year under the appeal."
4. At the time of hearing the ld. counsel for the assessee while reiterating
the same submissions as submitted before the ld. CIT(A) further submits that
the assessee acquired the recorded music business from Sony Music
Entertainment (India) Private Limited. Pursuant to the said acquisition, the
Company acquired the assets and liabilities of the business for a total
consideration of Rs. 9,45,00,000/-. As a part of the assets taken over, the
Company took over stock of music records including the stock obsolescence of
Rs. 2,94,99,126/-. In the books of the assessee as at 31-3-2005, the provision
for stock obsolescence required was determined at Rs. 1,80,98,960/-.
Accordingly, the provision for stock obsolescence of Rs. 1,13,91,166/- (Rs.
2,94,90,126/- minus Rs. 1,80,98,960/-) was written back in the books of
accounts as the provision was no longer required. He further submits that
since the provision was already disallowed and added back by Sony Music
Entertainment (India) Pvt. Ltd. in its return for the A.Y. 2005-06 amounting to
Rs. 1,30,41,027/-, hence it cannot be chargeable to tax in the hands of the
assessee again in the year under appeal. In support he refers to the relevant
pages of the paper book filed before the ld. CIT(A) containing pages 1 to 14 of
the assessee's paper book. In the light of the above, the ld. counsel for the
assessee submits that the claim made by the assessee may be allowed. He
further submits that the A.O. and the ld. CIT(A) without passing any speaking
order on this issue, have rejected the claim of the assessee. In support, he also
placed on record a copy of the order dtd. 29-1-08 passed u/s 154 of the Act.
He, therefore, submits that the deduction of provision for stock obsolescence
written back amounting to Rs. 1,13,91,166/- be allowed to the assessee.
5. On the other hand the ld. D.R. while relying on the order of the A.O. and
the ld. CIT(A) submits that since this issue has not been considered by the A.O.,
therefore, in the interest of justice, the matter may be sent back to the file of the
A.O. to decide the same afresh.
6. We have carefully considered the submissions of the rival parties and
perused the material available on record. We find that the facts are not in
dispute inasmuch as it is also not in dispute that the claim of the assessee was
denied by the A.O. without considering the same and without passing any
speaking order on the issue. We further find that before the ld. CIT(A) the
assessee has filed detail submission along with supporting statements
appearing at page 1 to 14 of the assessee's paper book, however, the ld. CIT(A)
while observing that no relevant information is available on record in support of
the claim, rejected the claim of the assessee. In the absence of any material to
show that the assessee has filed any such supporting material before the A.O.
or such material was examined by the A.O. during the course of assessment
proceeding or the ld. CIT(A) has called for the remand report from the A.O. on
the impugned issue, we are of the view that in the interest of justice the matter
should go back to the file of the A.O. and accordingly we set aside the orders
passed by the Revenue Authorities on this account and send back the matter to
the file of the A.O. to decide the same afresh and in accordance with law after
providing a reasonable opportunity of being heard to the assessee. The ground
taken by the assessee is, therefore, partly allowed for statistical purpose.
7. In the result, assessee's appeal stands partly allowed for statistical
Order pronounced in the open court on 18-7-2012. .
(B. RAMAKOTAIAH ) (DINESH KUMAR AGARWAL)
/ ACCOUNTANT MEMBER / JUDICIAL MEMBER
Mumbai; Dated 18-7-2012
. ../ . R.K. , Sr. PS
/ Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A) 20, Mumbai
4. / CIT -9, Mumbai
5. , , /
DR, ITAT, Mumbai E
6. / Guard file.
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai