As Far As Rent Of Ob Van, The Issue Is Covered Bya Decision Of This Court In C.i.t v. Malabar And Pioneerhosiery (P.) Ltd. [(1996) 221 Itr 117 (Ker.)]. We, Hence,Respectfully Follow The Aforesaid Decision And Answerquestion No.(Ii) In Favour Of T

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 13TH DAY OF SEPTEMBER 2018 / 22ND BHADRA, 1940 I.T.A.No.145 of 2015 [AGAINST THE ORDER DATED 21.11.2014 OF THE INCOME TAXAPPELLATE TRIBUNAL, COCHCIN BENCH IN I.T.A.NO.106/COCH/2011FOR THE ASSESSMENT YEAR 2007-08] APPELLANT/S: MALAYALAM COMMUNICATION LTD.,61, CHANDRAGIRI KURAVANKONAM, KOWDIAR P.O., THIRUVANANTHAPURAM. RESPONDENT/S: SRI.P.BALAKRISHNAN (E)SRI.K.S.MENON (K)SRI.MOHAN PULIKKALSRI.P.P.NARAYANAN THE DEPUTY COMMISSIONER OF INCOME TAXCIRCLE I, THIRUVANANTHAPURAM. BY ADVS. SRI.CHRISTOPHER ABRAHAM, SC FOR INCOME TAX DEPARTMENTSRI.K.M.V.PANDALAI, SC FOR INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 13.09.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT The appeal is from the order of the Tribunal, raising questions of law with respect to three additions madeby the Assessing Officer [for brevity "AO"]; confirmed by thefirst appellate authority and the Tribunal. The questions oflaw are re-framed as follows: (i)Whether the disallowance of Rs.10,00,000/-,which the assessee claimed as businessexpenditure, could have been treated as acapital expenditure?which the assessee claimed as businessexpenditure, could have been treated as acapital expenditure? (ii)Whether the renting of OB Van and rental valuereceived for the same be taken as income fromother sources?received for the same be taken as income fromother sources? (iii) Whether the interest income obtained by theassessee from the Fixed Deposits can be termedas income from other sources?assessee from the Fixed Deposits can be termedas income from other sources? 2. On the first question, it is seen that the Tribunal had found that the registration fees for up-linking,which was claimed as business expenditure, was taken asup-linking charges for a third channel. In fact, Annexures-Dand E points to the contrary. The assessee had two channelsand the Government of India had brought in “policy guidelinesfor down-linking television channels” as per Annexure-D. Theguidelines required every channel operator to payRs.5,00,000/- as initial fee before the signing of the Grantof Permission Agreement and, in addition, to pay an amount ofRs.1,00,000/- per channel per annum as the annual fees.Hence, the fee was a recurring expenditure and was onerequired to be made for continuing the business of theexisting channels. The assessee having two channels, had madean initial deposit of Rs.10,00,000/-, which was claimed asbusiness expenditure. Though the assessee had an enduringbenefit, as far as the first year of the introduction of the policy guidelines for down-linking of television channels areconcerned, it is an expenditure to be made for the purpose ofcarrying on the business. We are of the opinion thatRs.5,00,000/- deposited in that year would be a businessexpenditure of that year. In such circumstances, we answerquestion No.(i) in favour of the assessee and against theRevenue. 3. As far as rent of OB Van, the issue is covered bya decision of this Court in C.I.T. v. Malabar and PioneerHosiery (P.) Ltd. [(1996) 221 ITR 117 (Ker.)]. We, hence,respectfully follow the aforesaid decision and answerquestion No.(ii) in favour of the assessee and against theRevenue. 4. Question No.(iii) is on the interest income, policy guidelines for down-linking of television channels areconcerned, it is an expenditure to be made for the purpose ofcarrying on the business. We are of the opinion thatRs.5,00,000/- deposited in that year would be a businessexpenditure of that year. In such circumstances, we answerquestion No.(i) in favour of the assessee and against theRevenue. 3. As far as rent of OB Van, the issue is covered bya decision of this Court in C.I.T. v. Malabar and PioneerHosiery (P.) Ltd. [(1996) 221 ITR 117 (Ker.)]. We, hence,respectfully follow the aforesaid decision and answerquestion No.(ii) in favour of the assessee and against theRevenue. 4. Question No.(iii) is on the interest income, which the assessee contends, is from Fixed Deposits made forthe purpose of carrying on the business itself. Annexure-F isthe certificate issued by the Bank, certifying that certainFixed Deposits are part of securities submitted for sanctionof credit facilities. It is also the submission of theassessee that there were other Fixed Deposits made for thepurpose of Export Purchase Credit Guarantee Scheme for importof equipments and machineries, again for the purpose ofbusiness purposes. The Tribunal has merely relied on a Supreme Court judgment and approved the disallowance. We areof the opinion that the Tribunal has to re-consider thematter on facts. Hence, we decline to consider question No.(iii) framed by us and require the Tribunal to address thefacts for arriving at a decision. We also note that despite arequest having been made, there is no permission for set offunder Section 32(2) of the Income Tax Act, 1961 as againstthe unabsorbed depreciation which, in any event, ispermissible as has been held in CIT v. Jaipuria China ClayMines (P) Ltd. [(1966) 59 ITR 555 (SC)]. We, hence, partly allow the appeal and remand thematter to the Tribunal for considering the specific issuenoticed above. There shall be no order as to costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENONJUDGE APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDER DATED 11/12/2009 FOR THE ASSESSMENT YEAR 2007-08. ANNEXURE BTRUE COPY OF THE ORDER DATED 16/11/2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, TRIVANDRUM.THE COMMISSIONER OF INCOME TAX (APPEALS)-I, TRIVANDRUM. ANNEXURE CTRUE COPY OF THE ORDER DATED 21/11/2014 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.ANNEXURE DTRUE COPY OF THE NOTIFICATION DATED 11/11/2005 ISSUED BY THE GOVERNMENT OF INDIA.11/11/2005 ISSUED BY THE GOVERNMENT OF INDIA. ANNEXURE ETRUE COPY OF THE LETTER DATED 07/12/2009 SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER.SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER. ANNEXURE FTRUE COPY OF THE CERTIFICATE DATED 28/06/2014 ISSUED BY THE DHANLAXMI BANK LTD.28/06/2014 ISSUED BY THE DHANLAXMI BANK LTD. RESPONDENT'S/S ANNEXURES:NIL. Vku/- [True copy ]