Income Tax Appellate Tribunal - Hyderabad
Akash Cable Tv Network(P) Ltd.,, ... vs Department Of Income Tax on 13 March, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ' A ', HYDERABAD
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA No.:678/Hyd/2009 Asstt. Year : 2006-07
Dy. CIT, Circle 1 (1), Hyderabad Vs M/s Akash Cable TV Network
(P) Ltd., Hyderabad
(PAN AABCA 86761)
(Appellant) (Respondent)
Appellant by : Shri K.V.N. Charya, DR
Respondent by : Shri K. Vasant Kumar
ORDER
Per: N.R.S. Ganesan, Judicial Member This appeal preferred by the Revenue is directed against the order passed by the CIT(A)-II, Hyderabad dated 13.3.2009 and pertains to the assessment year 2006-07. The only issue arises for consideration is, disallowance of expenditure incurred by the assessee on replacement of traditional cable line with optical fiber cable.
2. Shri K.V.N. Charya, the departmental representative submitted that the assessee is engaged in distribution of television channels through cable net work. During the assessment year under consideration, the assessee has claimed an expenditure of Rs.66,81,000/- towards laying of cables and claimed the same as Revenue expenditure. However, the assessing officer disallowed the claim of the assessee by holding that the expenditure was in the capital field and allowed depreciation @ 15%. According to the learned departmental representative, the assessee claimed before the lower authorities that there was some dispute between the assessee and the ITA No.678/Hyd/2009 M/s Aakash Cable TV Networks, Hyderabad 2 ITA No.678/Hyd/2009 M/s Aakash Cable TV Networks, Hyderabad other cable net work operators, more particularly M/s R.R. Cables. The rival cable operators cut and damaged the cable of the assessee. Therefore the assessee claimed that just to replace the damage caused to the cable by the rival operators, the assessee replaced the cable. According to the learned departmental representative, the assessee replaced the older cable into optical fiber cable. According to the learned departmental representative, the optical fiber cable is in the nature of enduring benefit to the assessee. Moreover, in case the cable was cut and damaged by the rival group, the assessee was expected to repair and replace the damaged portion of the cable. The learned departmental representative submitted that admittedly, the assessee laid ordinary cable originally. The damaged portion of the ordinary cable can be replaced only by another ordinary cable. It cannot be replaced by optical fiber cable. In case, the optical fiber cable is to be laid, the assessee has to necessarily replace the entire cable including the part which are not damaged. In other words, according to the learned departmental representative, part of the traditional cable cannot be replaced by optical fiber cable. The learned departmental representative further submitted that, optical fiber cable will be useful to the assessee in case the assessee switches over to DTH method of transmission of signal. Therefore, according to the learned departmental representative, the replacement of the ordinary cable by optical fiber cable would definitely give an enduring benefit to the assessee. Therefore, it has to be treated as capital expenditure. The learned departmental representative further pointed out that when the assessee replaced traditional cable by optical fiber cable, there was up gradation. Therefore, the expenditure incurred by the assessee has to be treated as capital expenditure. Referring to the order of the CIT (A), the learned departmental representative pointed out that the CIT (A) is not correct in saying that no new asset came into existence.
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3. On the contrary, Shri K. Vasant Kumar, learned counsel for the assessee submitted that the assessee has admittedly in the business of distribution of television channels through net work. The assessee receiving signals through satellite and transmitting the same to the respective customers through cable net work. There are rival operators in the field. On several occasions, due to rivalry between the TV cable operators, the cable of the assessee was damaged and it was also reported in the newspapers. According to the learned counsel for the assessee, the assessee was replacing the damaged cable in order to continue in his business. According to the learned counsel, unless the cable was repaired and replaced, the assessee cannot continue in the business of distribution of television channels through cable net work. No doubt, originally the assessee laid traditional cables. However, when the traditional cable was cut and damaged by the rival groups, the assessee has repaired and replaced the same by laying optical fiber cable. By laying optical fiber cable, the assessee is not getting any enduring benefit. At the best, the assessee may continue in the very same business of distribution of television channels through cable net work. The customers may get a better signal through optical fiber cable. Therefore, it may not be correct to say that the assessee gets an enduring benefit by replacing the traditional cable into optical fiber cable. The learned counsel for the assessee further submitted that when the assessee laid optical fiber cable, there is no guarantee that the optical fiber cable gives any benefit. The assessee has the very same risk of damage being cast by rival operators. The learned counsel further submitted that the cable lines are laid in the public premises and it is out of the control of the assessee. Therefore, the risk of being damaged by rival group, theft by anti socials cannot be ruled out. In 3 4 ITA No.678/Hyd/2009 M/s Aakash Cable TV Networks, Hyderabad those circumstances, according to the learned counsel, the expenditure incurred by the assessee has been rightly allowed by the CIT (A).
4. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee is in the business of distribution of television channels through cable net work. Originally, the assessee transmitted the television signals by traditional cables. Subsequently, during the assessment year under consideration, the assessee replaced the traditional cable into optical fiber cable. The contention of the assessee is that the traditional cable was cut and damaged by the rival cable net work operations. This contention of the assessee is not disputed by the Revenue. The only contention of the Revenue is that, when the part of the traditional cable was cut and damaged, the assessee was expected to repair and replace the damaged part alone and not the entire cable by optical fiber cable. The learned departmental representative clarified that part of the traditional cable which was said to be damaged cannot be replaced by optical fiber cable. Therefore, the learned departmental representative contends that the assessee gets an enduring benefit. For the purpose of transmitting TV signals, which was received by the assessee from satellite, cable net work is required. When the existing traditional cable was damaged, the assessee has to necessarily replace the damaged portion of the cable for continuing in the business. Transmission of signal is a technology which is changing day to day basis due to scientific advancement. Therefore, when the assessee is in the business of transmission of television signals, it has to maintain proper cable net work system as well, in order to give better quality of signal to the customers/viewers. When the traditional cable was damaged, the assessee has to maintain the cable which will give a better quality of 4 5 ITA No.678/Hyd/2009 M/s Aakash Cable TV Networks, Hyderabad signal to the customers/viewers. Therefore, the assessee has replaced the traditional cable into optical fiber cable. By replacing into optical fiber cable, as rightly contended by the learned counsel for the assessee, the viewers may get a better signal. It is not the contention of the Revenue that the subscriber or customer base has increased due to optical fiber cable. The contention of the learned departmental representative is that the assessee may switch over to DTH method of transmission of signal. In our opinion, by using optical fiber cable, the assessee may not be able to switch over to DTH form of transmission. DTH form of transmission is a method of transmission of signal by a wireless mode. In other words, the television cable operators receive the signals from satellite and transmitting the same to the respective customers/viewers through wireless method and such signal would be received by the customers/viewers in their respective houses. Therefore, for transmitting the signal through DTH mode, optical fiber cable may not be an essential requirement. The very fact that the optical fiber cable was laid by the assessee for continuing in the business of transmitting signal through cable net work system establishes that the assessee did not acquired any new asset which is of enduring in nature. Therefore, in our opinion, merely because the optical fiber cable gives better quality of signal to the customers/viewers it cannot be construed as giving enduring benefit to the assessee. In our opinion, replacement of cable is an essential requirement for continuation in the business. Therefore, the expenditure incurred by the assessee is in the Revenue field. We do not find any infirmity in the order of the lower authority and the same is confirmed.
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5. In the result, the appeal of the Revenue stands dismissed.
Order pronounced in the open Court 30.6.2010
Sd/- sd/-
N.R.S. GANESAN CHANDRA POOJARI
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 30th June, 2010
Copy forwarded to:
1. Dy. CIT, Circle 1 (1), 4th Floor, Aayakar Bhavan, Hyderabad
2. M/s Akash Cable TV Networks (P) Ltd., 603, 6th Floor, Dega Towers, Raj Bhavan Road, Somajiguda, Hyderabad
3. CIT(A)-II, Hyderabad.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
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