JCDECAUX ADVERTISING INDIA PVT. LTD. Vs. DCIT
LAWS(IT)-2014-9-25
INCOME TAX APPELLATE TRIBUNAL
Decided on September 08,2014

Jcdecaux Advertising India Pvt. Ltd. Appellant
VERSUS
Dcit Respondents

JUDGEMENT

R.S.Syal, Member (A) - (1.) THIS appeal by the assessee is directed against the order passed by the CIT(A) on 09.12.2010 in relation to the assessment years 2007 -08.
(2.) GROUND nos. 3 and 5 to 7 of the appeal are dismissed as not pressed by the ld. AR. The only issue which survives in the remaining grounds is against the refusal to allow deduction of the expenses of Rs.3,17,91,180/ -, on the reasoning that the business of the assessee had not commenced during the previous year relevant to the assessment year under consideration.
(3.) BRIEFLY stated, the facts of the case are that the assessee was incorporated in April, 2005 to carry on the business of out of home advertisement, consisting of street furniture (such as advertising on bus shelters, public utilities, parking lots, etc.) bill boards and transportation (such as advertisement in airports, railway stations, etc.). The assessee was awarded its first contract by New Delhi Municipal Corporation (NDMC) in March, 2006 for construction of 197 Bus Queue Shelters (BQSs) on Build -Operate -Transfer (BOT) basis. As per this contract, the assessee was required to undertake preliminary investigations, study, design, finance, construct, operate and maintain BQSs at its own cost. In consideration, the assessee was allowed to commercially exploit the space allotted in these BQSs by means of display of advertisement etc. for a period of 15 years. During the said period of 15 years, the title and other rights in BQSs were to vest in NDMC. During the year under consideration, the assessee claimed deduction for a sum of Rs. 18,36,62,148/ - incurred in discharge of its obligations under the NDMC contract. Such expenditure was of capital nature. Here, we want to make it clear that the AO made disallowance of Rs. 18.36 Crore by treating it as capital expenditure, against which the assessee is not aggrieved inasmuch as it has not pressed ground no. 3 on this issue. The second expenditure amounting to Rs. 3,17,91,180/ - was incurred and claimed by the assessee as deductible. The AO accepted such expenditure as of the revenue nature but refused to allow deduction on the ground that the business of the assessee had not commenced. In reaching this conclusion about the non -commencement of business, the AO held that the business would commence only when the BQSs would be ready for providing space for advertisement to the assessee, being the very reason for which the assessee company entered into an agreement with the NDMC. This resulted into disallowance of Rs. 3.17 crore. The ld. CIT (A) upheld the assessment order. The assessee is aggrieved against treating the business as not set up and consequently not allowing deduction for this revenue expenditure.;


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