Commissioner of Income Tax vs Freementle India Television

The revenue is aggrieved by an order dated 27-4-2005 passed by the Income Tax Appellate Tribunal, Delhi Bench C in ITA No.

2607/Delhi/2001 for the assessment year 1997-98.

A penalty of Rs. 4,58,393 was levied against the assessed u/s 271(1)(c) of the Income Tax Act, 1961. This has been set aside by the impugned

order.

The assessed produces TV Serials and returned a total income of Rs. 15,60,920, which was assessed to Rs. 24,94,950 u/s 143(3) of the Act.

The assessed claimed a deduction of Rs. 10,66,029 as format fee. The assessing officer did not allow this deduction and, Therefore, this amount

was added to the total income. The assessing officer also initiated penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars.

According to the assessed, it had sent a letter on 2-6-1999 giving, its recomputation in which it had withdrawn its claim regarding format fee. It

was also contended by the assessed, based on the Audit Report submitted on 24-12-1999 that the amount towards format fee had already been

offered for tax in the assessment year 1997-98 in its return of income filed as far back as on 30-11-1997. This fact appears to have been

overlooked by the assessing officer in the penalty proceedings.

In appeal, the Commissioner (Appeals) in his order dated 22-3-2001 relied upon the Audit Report and held that correct particulars were given

by the assessed for the year under consideration. He was of the view that assessment proceedings were different from penalty proceedings and

since the assessed had revised its computation of income even before the assessing officer had started assessment proceedings, there was no

concealment of facts or furnishing of inaccurate particulars by the assessed. The Commissioner also held that the assessed was maintaining its

accounts under the mercantile system and, Therefore, it was entitled to take into account its contractual liability to pay format fees to foreign

collaborator on accrual basis.

The revenue went up in appeal before the Tribunal which passed the impugned order. The Tribunal accepted the finding of the Commissioner

that the revised computation has been sent well in advance of the assessment order being passed in March, 2000 and even before the controversy

arose sometime in October, 1999. On these facts, the Tribunal came to the conclusion that the recomputation given by the assessed was not an

afterthought but was genuine and made well in time. The Tribunal also accepted the view that since the assessed was following the mercantile

system of accounting, the liability had accrued and the assessed was entitled to claim a deduction during the relevant year.

After hearing learned Counsel for the parties and considering the facts i9ind circumstances of the case, we are of the view that no substantial

question has arisen. The only issue is whether the assessed had withdrawn its claim well in time so as not to attract the penal provisions of Section

271 (1)(c). The record suggests that the assessed had withdrawn the claim for deduction and had offered the amount for tax in November, 1997

well in time.

In view of the above facts, we are of the view that no substantial question of law has arisen for our consideration.

Dismissed.