ITAT : Forfeited media rights advance not capital loss; Grants deduction to Zee Entertainment

Mumbai ITAT allows deduction u/s. 37 to Zee Entertainment (‘assessee’) with respect to write off of advance given to BCCI, rejects Revenue's stand that it represents a capital loss as it is in relation to acquisition of media rights (which is a capital asset); Assessee acquired media rights from BCCI on payment of US $ 17.5 million, out of which US$ 10 million was adjusted against two matches played and the balance was kept as deposit (to be adjusted against last series), however, owing to dispute, the contract was terminated and the deposit was forfeited by BCCI during relevant AY 2008-09; ITAT holds that the agreement with BCCI for acquiring the media rights was pursuant to assessee’s normal business activity (of broadcasting and distribution of TV programmes) and US$ 10 million which was adjusted in earlier year was offered to tax by assessee; Further rejects Revenue’s stand that since the assessee filed a legal case for recovery and also initiated arbitration proceedings, it could not be said that the loss had actually crystallized during relevant AY, similarly, rejects Revenue’s submission that write-off was premature as assessee did not fully explore the possibility of its recovery; ITAT remarks that “it is the judgement of the assessee as a businessman.”, notes that despite arbitration proceedings, as assessee did not visualize any sign of recovery, it wrote-off the forfeited amount and claimed deduction:ITAT