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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,
      Linking Road,
      Santacruz West,
      Mumbai.
         ./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-

06.
                                          2                       ITA6569/M/2010






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."
                                         3                      ITA6569/M/2010




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
                                         4                       ITA6569/M/2010



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
                                         5                          ITA6569/M/2010



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

purpose.

                                                                             

      Order pronounced in the open court on 18-7-2012.                     .
                               18-7-2012    


               Sd/-                                          sd/-
(B. RAMAKOTAIAH )                              (DINESH KUMAR AGARWAL)
   / ACCOUNTANT MEMBER                             / JUDICIAL MEMBER


 Mumbai;          Dated 18-7-2012


. ../ . R.K. , Sr. PS
                                      6                 ITA6569/M/2010




        /     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,
                     //True Copy//


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