T.V. Today Network Limited Vs ACIT (ITAT Delhi) – Key Tax Rulings on Interest Deductibility, Section 14A, Section 80G on CSR, and Depreciation on Workforce as Intangible Asset

Background and Overview

A broadcasting enterprise engaged in FM radio operations and news channel transmission came before the Income Tax Appellate Tribunal, Delhi, in two cross-appeals — ITA No. 1821/Del/2024 (filed by the Revenue) and ITA No. 1449/Del/2024 (filed by the assessee) — both arising from the order dated 26.02.2024 passed by the National Faceless Appeal Centre (NFAC), Delhi, acting as the Commissioner of Income Tax (Appeals). The underlying assessment order dated 30.09.2021 was passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, pertaining to Assessment Year 2018-19.

The assessee filed its return of income for AY 2018-19 on 01.12.2018, declaring total income of Rs. 1,83,72,00,100/- under the normal provisions of the Act, and book profits of Rs. 1,23,47,00,498/- under Section 115JB. The case was selected for scrutiny under CASS, and thereafter proceeded under the Faceless Assessment Scheme, 2019. Several significant disputes arose during the assessment, spanning four distinct legal issues, each of which is examined in detail below.

Issue 1: Deductibility of Interest Paid on Delayed FM Radio Migration Fee Under Section 37(1)

Factual Matrix

The assessee had entered into a Grant of Permission Agreement (GOPA) with the Ministry of Information and Broadcasting (MIB) in December 2006, under which it operationalized seven FM radio stations across cities including Delhi, Mumbai, Kolkata, Amritsar, Jodhpur, Patiala, and Shimla. Following MIB's Phase-III migration policy notification, the assessee entered into an agreement in December 2014 to sell all seven stations, but MIB approved the transfer of only four stations. The remaining three — covering Delhi, Mumbai, and Kolkata — could not be transferred, following which the assessee approached the Delhi High Court by way of a writ petition.

Subsequently, the assessee withdrew the writ petition and filed a fresh application for migrating its three radio stations to Phase-III. In April 2017, MIB issued an offer letter demanding Rs. 71.37 crores as migration fees (Non-Refundable One-Time Migration Fee/NOTMF) and Rs. 13.78 crores as interest on account of delayed payment of the migration fees. The assessee executed the GOPA on 23.05.2017 and made the payments in April and May 2017. The migration was effective from 01.04.2015 for 15 years.

The assessee capitalized the migration fees of Rs. 71.37 crores as a capital expenditure while treating the interest of Rs. 13.78 crores as revenue expenditure, claiming it as a deduction in the Profit and Loss Account. Critically, throughout this entire period, the three radio stations continued to operate without interruption.

Assessing Officer's Position

The Assessing Officer held that since migration of the FM radio stations was conditional upon payment of both the migration fees and the interest, the interest payment was also capital in nature. Accordingly, the AO disallowed Rs. 10,33,85,802/- (after allowing 25% depreciation on Rs. 13,78,47,736/-) and added the same to the total income of the assessee.

CIT(A)'s Finding

The CIT(A) reversed the AO's addition, relying on the Delhi High Court's ruling in the case of Bharti Hexacom Ltd. in IT Appeal Nos. 893, 1328, 1333, 1336, 1679 & 1680 OF 2010, 996 OF 2011, 114 & 177 OF 2012 AND 417 OF 2013, which established that expenditure related to the continuation of an existing business is revenue in nature, as no new asset is acquired. The CIT(A) found that the assessee had held the original license since 2006 and was merely continuing with renewal/migration through successive phases — Phase I, Phase II, and Phase III — without acquiring any fundamentally new asset.

ITAT Delhi's Ruling

The Tribunal upheld the CIT(A)'s order. It observed that the MIB's letter dated 20.04.2017 clearly showed that the interest components — Rs. 3,40,21,994/- on 25% of NOTMF and Rs. 10,38,25,741/- on 75% of NOTMF — were purely compensatory in nature, levied on account of the delay in payment of the migration fee. The ITAT placed reliance on the Co-ordinate Bench's ruling in Bharti Airtel Ltd. vs. Pr. CIT(A) reported in 171 taxmann.com 754 (Del Trib.), wherein it was categorically held: