Setback to NDTV: ITAT dismisses Deduction Claim towards Business Expenditure [Read Order]

In a major setback to NDTV, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has confirmed the orders of the income tax department disallowing the deduction claim towards pre-operative expenses.

The assessee, M/s NDTV Studios Ltd, filed return of income declaring income of Rs. 21,03,02,529/- which was processed u/s 143(1) of the Act, subsequently, selected for scrutiny and notices were issued. The assessment proceedings have been initiated against the assessee and the assessee has participated through its representative. The assessment order came to be passed on 17/12/2012 against the assessee by disallowing the claim of Rs. 52,25,161/- made by the assessee as business expenditure.

The department contended that the ‘business of the assessee had not been set up during the year under consideration and all the expenses claimed by the assessee are pre-operative in nature which should have been capitalized. Thus the Ld. A.O held that the expenses claimed by the assessee are not deductible as business expenditure’ and the same has been disallowed.

After analyzing the facts, the Tribunal bench consists of Shri N. K. Billaiya, Accountant Member and Shri Yogesh Kumar U.S., Judicial Member observed that “it is clear that the fit out works related to building of Studio and production facilities was under progress during the relevant previous year and the premises area occupied only after completion of fit out work i.e. from 05/06/2009 which can be corroborated with the Leave and License Agreement with India Bulls. Thus, in any stretch of imagination the assessee was not in a position to procure business and delivery its service prior to June, 2009.”

Confirming the orders of the lower authorities, the Tribunal held that “the assessee had also not taken the premises on rent and had not completed the setting up of the facilities for running the studio. Therefore, the assessee was not in a position to solicit customers till the end of May 2009 before the start of Leave and License Agreement 05/06/2009. In view of the above, we have no hesitation to hold that the business had not been set up during the previous year relevant to Assessment Year 2009-10. Further, in our opinion, disallowance made by the A.O which has been confirmed by the Ld.CIT(A) is in order and we do not find any error or legal infirmity the approach of the Lower Authorities.”

To Read the full text of the Order CLICK HERE

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