These cross appeals are directed against the order dated 10-05-2010 passed by the Ld. CIT(A)-IV, Kochi and they relate to the assessment year 2007-08. I.T.A. Nos.429 & 481/Coch/2010 2

2. The assessee is assailing the decision of the Ld. CIT(A) in confirming the following additions made by the Assessing Officer. (a) Disallowance of deduction claimed under rule 9B(4) of the Act: Rs. 77,50,000/-. (b) Disallowance of claim of additional depreciation claimed on FM radio equipments: Rs.34,13,194/-

3. The revenue is assailing the decision of Ld. CIT(A) in deleting the disallowance of depreciation claim of Rs. 12,79,945/- made by the AO on the FM radio equipments.

4. The facts relating to the issues under consideration are stated in brief. The assessee is engaged in the business of printing and publishing of newspapers and magazines. In the return of income filed for the year under consideration, the assessee claimed deduction under Rule 9B(4) of the Act at Rs. 77,50,000/-, being the cost of acquisition of the satellite and terrestrial television rights of 5 Malayalam films acquired during the financial years 2004-05 to 2005-06. The Assessing Officer noticed that the assessee did not make commercial use of the said films in any of the financial years, i.e., from 2004-05 to 2006-07 and hence no income was generated out of the acquisition of film rights. The Assessing Officer noticed that, as per Rule 9B of the Income tax rules, generation of income either in the year of purchase of rights or in the subsequent year is the primary condition for allowing deduction under that rule either in the year of purchase or in the succeeding year. Accordingly the AO held that the question of deduction of cost of rights of films purchased during the year under consideration does not arise. Similarly he held that deduction of cost of rights acquired in the earlier years and brought forward during the current year also does not arise at all. The Assessing Officer noticed that the assessee had claimed identical deductions in the earlier years also and it has not been allowed in those years also. The Assessing Officer also drew support for his view from the following decisions also: (a) CIT vs. Prakash Pictures (2003) 260 ITR 456 (Bom.) . (b) Madathil Brothers vs. Dy. CIT (2008) 301 ITR 345 (Ker.). I.T.A. Nos.429 & 481/Coch/2010 3 Accordingly, the Assessing Officer disallowed the amount of Rs. 77.70 lakhs claimed by the assessee under Rule 9B(4) of the Income tax Rules.

4.1 During the year under consideration, the assessee had purchased equipments for starting FM radio broadcasting services, i.e., a new line of business. The cost of equipments purchased by the assessee for FM radio operations was Rs. 1,70,65,938/-. The assessee claimed depreciation at half the normal rate on the above said value which worked out to Rs.12,79,945/-. The assessee had also claimed additional depreciation u/s. 32(1)(iia) of the Act at Rs.17,06,593/-. The Assessing Officer noticed that the assessee had categorised the expenses booked under the head pre-operative expenses FM radio and Licence fee for FM radio as assets under construction in its balance sheet. It was also noticed that the licence for operation of FM radio was obtained only in the succeeding year. The AO also noticed that the assessee did not generate any income from this line of business. The AO also noticed that depreciation is allowed under section 32 of the Act on the assets only if they are put to use for the purpose of business. In view of the factual position discussed above, the Assessing Officer held that the assessee could not have used the above said assets for business. Accordingly, the Assessing Officer proposed to disallow the depreciation claimed by the assessee. However, the assessee contended that depreciation can be claimed when the assets are kept ready for use. For this proposition, the assessee placed its reliance on the following case laws: (a) CIT vs. Geotech Construction Corporation (2004) (244 ITR 452) (Ker.). (b) CIT vs. Refrigerator Allied Industries Ltd. (2000) 247 ITR 12 (Del.).

4.2 The Assessing Officer held that the case laws relied upon by the assessee can be distinguished on facts. The Assessing Officer, by placing the reliance on the decision of Honble Bombay High Court in the case of Dinshkumar Gulapchand Agarwal vs. CIT (2004) 267 ITR 768 held that the asset has to be used in the business for claiming depreciation and merely keeping it ready does not entitle the assessee to claim depreciation. The assessee also submitted that the FM radio operations can be divided into two divisions namely, Central Technical Area (CTA) and Common Transmission I.T.A. Nos.429 & 481/Coch/2010 4 Infrastructure (CTI). The assessee submitted that the CTA division produces the programmes and hence, the assets acquired for the said purpose are fully under its control. The CTI division are assets in the nature of

infrastructure created by the assessee at All India Radio (AIR)

for transmitting various programmes produced by CTA. The assessee submitted that the CTA was ready in the previous year but the CTI was not. Accordingly it was submitted the assessee has shown CTI equipments as asset under construction. However, the Assessing Officer held that the very fact that the CTI was not ready clearly proves that the FM radio operation was not even set up during the year under consideration. The AO also observed that the assessee could commence business only when both CTA and CTI are ready for operation. Accordingly, the AO held that assessee could not have used the assets during the year under consideration and accordingly rejected the claim of depreciation made on FM radio assets.

4.3 With regard to the claim of additional depreciation, the AO noticed that the additional depreciation u/s. 32(1)(iia) of the Act is allowed to those assessees who are engaged in the business of manufacture or production of any article or thing. The Assessing Officer noticed that the assessee has claimed additional depreciation on FM radio equipments. Though the assessee was also engaged in publication of news papers and magazines, the AO held that the activities carried on in the FM radio business cannot be categorised as manufacturing activity and further they do not have any relationship with the existing manufacturing activity of the assessee. Accordingly, he disallowed the additional depreciation claimed by the assessee.

5. The assessee challenged all the three additions, referred above, by filing appeal before Ld. CIT(A). The first appellate authority noticed that the deduction claimed u/s. 9B(4) was subject matter of appeal in the earlier years also before the Tribunal and the Tribunal, vide its order dated 11-08-2009, in the assessees own case in I.T.A. No. 17/Coch/2009 relating to the assessment year 2005-06 has confirmed the identical disallowance made by the Assessing Officer. Accordingly, the Ld. CIT(A), by following I.T.A. Nos.429 & 481/Coch/2010 5 the order passed by the Tribunal referred above, confirmed the disallowance of Rs.77.55 lakhs made by the Assessing Officer.

5.1 With regard to the claim of depreciation, the assessee submitted that it was in the process of preparing programmes for future broadcasting by employing various types of staffs. It was submitted that the assessing officer has allowed the salary payments made to the above said employees as deduction. Accordingly, the assessee contended before the Ld. CIT(A) that the process of producing programmes for future broadcasting should be treated as commencement of business. The Ld. CIT(A) was convinced with the said contentions and accordingly allowed the claim of depreciation. The Ld CIT(A), in this regard, placed reliance on the following case laws: (a) CIT vs. Saurashtra Cement and Chemicals (91 ITR 170) (Guj.). (b) ESPN Software India P. Ltd. (301 ITR 368) (Del.).

5.2 With regard to the claim of additional depreciation, the Ld. CIT(A) concurred with the view taken by the Assessing Officer that the activities carried on in FM radio station cannot be considered as manufacture or production of articles or things. Accordingly, he confirmed the disallowance of additional depreciation claimed by the assessee. Aggrieved by the order of the Ld. CIT(A), both the parties have filed these appeals before us.

6. Before proceeding to adjudicate the issues urged on merits, we prefer to address a legal issue urged by the Ld A.R. The Ld Counsel for the assessee questioned the right of the department to file appeal before the Tribunal. According to the Ld A.R, the assessing officer did not appear before the Ld CIT(A), despite the service of notice of hearing to him. According to Ld A.R, the assessing officer should have exercised his right by appearing before Ld CIT(A) and should have supported his order on the issues contested by the assessee. Since the AO did not appear before the Ld CIT(A) and exercised his right, according to Ld A.R, the AO is not entitled to file appeal before the Tribunal in view of the decision of Honble jurisdictional High Court in the case of P.R. Narahari Rao Vs. CIT (2008)(299 ITR 400)(Ker). The Ld A.R also relied upon various I.T.A. Nos.429 & 481/Coch/2010 6 case law, wherein it was held that it is not open for the Revenue to challenge the correctness of the decision rendered by a High Court in case of one assessee, when it had accepted the decision in the case of other assessees.

6.1 We are unable to agree with the contentions of the assessee in this regard. In our view, the Ld A.R has raised this contention without properly appreciating the scheme of the Act. The remedy by way of appeal is provided only to the aggrieved party under the scheme of the Income tax Act. The assessing officer, who is passing the assessment order, cannot be considered to be an aggrieved party in respect of his own order. Only the assessee may be aggrieved by the assessment order passed by the assessing officer. Hence the right of filing appeal before Ld CIT(A) against the assessment order is given to the assessee only. The assessing officer cannot file appeal against his own order. However, both the assessing officer and the assessee may be aggrieved by the order passed by Ld CIT(A) and hence the right of filing appeal before the Tribunal is given to both the parties. Hence, the right to appeal accrues to the AO only against the appellate order passed by Ld CIT(A). The first appellate authority is obliged to give the notice of hearing to the assessing officer in order to have a fair hearing. If the AO does not appear before the Ld CIT(A) for the reasons best known to him, in our view, it does not mean that the assessing officer has lost the right to file appeal before the Tribunal. Even by appearing before the Ld CIT(A), the AO could utmost support his order. On the contrary, it is the responsibility of the assessee to challenge all the points that have been decided against him by the AO in the appeal filed before Ld CIT(A). If the assessee has accepted certain adverse points by not raising contentions in the appeal filed before Ld CIT(A), then he may not be entitled to urge the same before the Tribunal as held by Honble Kerala High Court in the case of P.R. Narahari Rao (supra). However, the ratio of said decision cannot be applied to the appeal filed by the AO before the Tribunal, since the assessing officer gets the right to file appeal before Tribunal only after the receipt of order passed by Ld CIT(A). Since the AO does not have right to file appeal before Ld CIT(A) against his own order, in our view, it cannot be said that his absence would disentitle him to file appeal before Tribunal against the order passed by Ld CIT(A). The other case law relied upon by the I.T.A. Nos.429 & 481/Coch/2010 7 assessee, in our view, does not apply to the issue urged by the assessee. Accordingly, we reject the contentions raised by Ld A.R on this issue.

7. The first issue in the appeal filed by the assessee relates to the disallowance of the claim for deduction under Rule 9B(4) of the Income tax Rules in respect of the cost of television rights of Malayalam Films acquired by the assessee. The AO has given a categorical finding that the assessee did not generate any income by using those films. The Ld CIT(A) has noticed that the Tribunal has considered an identical issue in the assessees own case in an earlier year (referred supra) and has upheld the view taken by the assessing officer. Accordingly, by following the decision of the Tribunal, the Ld CIT(A) has upheld the disallowance in this year also.

7.1 Before us, the Ld A.R submitted that the assessee has challenged the decision rendered by Tribunal by filing appeal before the Honble High Court of Kerala. However, the Ld A.R could not furnish the details of results of the said appeal. Hence, as on date, the decision rendered by the co-ordinate bench of the Tribunal on this issue remains in force and we have already noticed that the Ld CIT(A) has followed the said decision of the Tribunal. Under these circumstances, we do not find any reason to interfere with the decision rendered by Ld CIT(A) on this issue. Accordingly, we uphold the order of Ld CIT(A) in confirming the disallowance of claim made u/s 9B(4) of the Act.

8. The next issue urged by the assessee relates to the rejection of claim of additional depreciation on FM radio equipments. Before considering this issue, we prefer to adjudicate the issue urged by the revenue, viz., the eligibility of the assessee to claim normal depreciation on FM radio equipments during the year under consideration.

8.1 The AO rejected the claim of normal depreciation on the ground that the FM radio equipments were not put to use by the assessee. It is an admitted fact that the FM radio operation can be commenced only after receipt of licence from the Ministry of Communications & Information Technology, Government of India. The Director of the I.T.A. Nos.429 & 481/Coch/2010 8 assessee company has filed an affidavit dated 05-02-2013 before us, where in the assessee has confessed that the licence to operate the FM stations was received by it only on 08-08-2007. Now the question that arises is whether the assessee is entitled to claim depreciation on FM radio equipments during the year under consideration, even if it did not have licence to operation FM radio stations

8.2 The main contention of the assessee is that it is eligible to claim depreciation, if the assets are kept ready for use. One more important submission of the assessee is that it had to prepare the programmes, serials, talk shows etc., prior to obtaining the licence and then only it can immediately start broadcasting the programmes on air. According to the assessee, it was using all the equipments for preparing the programmes and hence it was actually using them for the purpose of its business. We notice that the ld CIT(A) has accepted the said contentions of the assessee only on the reasoning that there is nothing on the record to show that the above said claim of the assessee is factually incorrect. However, we notice that neither the assessee bring on record any material to substantiate its claim that it was in the process of preparation of various programmes by using the FM radio equipments purchased by it nor the Ld CIT(A) took steps to verify the veracity of the said claim. During the course of hearing these appeals also, the hearing were adjourned two times to give opportunity to the assessee to produce materials/evidences to substantiate the said claim put forth by it. However, the assessee has failed to produce any material/evidence in support of its claim, referred above.

8.3 We notice that the assessee has submitted before the assessing officer that the FM radio operations can be divided into two divisions; viz., Central Technical Area (CTA) and Common Transmission Infrastructure (CTI). The assessee has admitted that the CTI facility has to be installed at All India Radio (AIR) and it was not ready by the end of the year under consideration. Hence, the AO has taken the view that the business of the assessee cannot be considered as set up unless both the divisions are made functional. However, we notice that the Ld CIT(A) has treated both the divisions as separate units and accordingly held that the assessee is entitled to claim depreciation I.T.A. Nos.429 & 481/Coch/2010 9 on CTA assets, since it has used the equipments of CTA division for preparing the programmes.

8.4 However, we find force in the view taken by the AO. The programmes, if any, prepared by using equipments installed in CTA division would not be of any use unless they are broad cast by using CTI infrastructure installed in AIR. Hence, in our view, both the divisions are mutually dependent upon each other for carrying the FM radio operations and it may not be correct to view both the divisions as independent of each other. The assessee itself has admitted that the CTI infrastructure was not ready by the end of the year under consideration and hence, in our view, the AO was right in holding that the business of the assessee cannot be considered as set up during the year under consideration.

8.5 The view expressed by the AO finds support from the decision rendered by the Honble jurisidictional Kerala High Court in the case of CIT Vs. Air Travel Enterprises India Ltd (265 ITR 537). In the said case, the assessee therein took delivery of vehicles on March 30, 1992. The assessee took the vehicle from Ernakulam to Thiruvananthapuram on the basis of a temporary permit valid up to April 24, 1992. The assessee got registration as non-transport vehicle on April 3, 1992 with retrospective effect from March 30, 1992. Thereafter the assessee had applied for and obtained a contract carriage licence only on May 5, 1992. Before the AO, the assessee had submitted that it had used the vehicle on April 1, 1992 for taking a tourist party. Under these factual aspects, the question that came for consideration of the Honble Kerala High Court is whether it can be said that the vehicle was kept ready for use on March 30, 1992 or March 31, 1992, when the regular contract carriage licence was issued only on May 5, 1992. The Honble High Court held that vehicle was not kept ready for use for the simple reason that the contract carriage permit was obtained for the vehicle only on May 5, 1992.

8.6 In the instant case also, it is an admitted fact that the assessee obtained the licence for commencing the FM radio operations, only in the succeeding year. Hence, I.T.A. Nos.429 & 481/Coch/2010 10 by following the decision of jurisdictional High Court, referred above, we hold that the assets cannot said to have been kept ready by March 31, 2006, when the licence itself was issued only on 08-08-2007.

8.7 The Ld A.R also raised an alternative contention viz., the department has not challenged the categorical finding of the Ld CIT(A) to the effect that, after the introduction of Block assets concept, it is not required to identify about the user of the individual equipments. Before us also, the Ld A.R vehemently supported the said view expressed by Ld CIT(A) by placing reliance on the decision of Honble Delhi High Court in the case of Bharat Aluminium Co. Ltd Vs. CIT (2010)(187 Taxman 111).

8.8 We have carefully considered by the decision rendered in the case of Bharat Aluminium Co. Ltd. In the said case, the assessee therein had purchased a machinery called PSL equipment in the previous year relevant to the assessment year 1990-91 and the same had entered into the block in that year itself. While finalising the assessment for the assessment year 1995-96, the AO disallowed the claim of depreciation on the above said asset on the reasoning that it remained as non- operating plant in that year. Under these factual aspects, the Honble Court held that the machinery has already lost individual identity on forming part of block assets and hence the user of individual asset is not required and relevant factor would be user of block asset. Thus, it is seen that the ratio laid down by the Honble Delhi High Court in the case of Bharat Aluminium Co. Ltd shall apply to the claim of depreciation on assets in subsequent years and not to the year in which the asset was purchased.

8.9 In the instant case, the FM radio equipments are new machineries purchased by the assessee during the year under consideration, that too after September, 2005. The depreciation is allowed u/s 32(1) of the Act only if the assets are owned wholly or partly by the assessee and used for the purposes of the business and further depreciation is allowed on any block of assets at such percentage on the written down value thereof, as may be prescribed. A careful reading of the provisions of sec. 32(1) would show I.T.A. Nos.429 & 481/Coch/2010 11 that the assessee has to satisfy following conditions cumulatively in order to become eligible to claim depreciation:- (a) The assets should be in the category of assets prescribed in sec. 32(1). (b) The assets should be owned by the assessee either wholly or partly. (c) The assets should have been used for the purposes of the business. Once these three conditions are satisfied, then the depreciation is allowed on block of assets at such rates as may be prescribed. A careful reading of the above said provisions would show that the asset would enter into the block only on satisfying all the three conditions mentioned above. After so entering into the block; the asset would loose its individual identity only in the subsequent years. Hence, in our view, the user of the asset for the purpose of business is the primary condition for including the same in the relevant block. Hence, we are unable to agree with the contentions of Ld A.R that the asset would loose its identity on its purchase itself, lest it would nullify the condition of user of asset for the purpose of business mandated in sec. 32(1) of the Act.

8.10 We have already noticed that the assessee has not brought any material on record to substantiate its claim that it was using the CTA equipments for preparing programmes. Even otherwise, the FM radio business can be considered as set up only when both the CTA and CTI divisions are made functional. We have also held that the assets would enter into the block only upon using them for the purposes of business. In view of the undisputed factual aspects discussed above, we are unable to agree with the various contentions urged by Ld A.R on this issue. Hence, in our view, the various case law relied upon by the Ld A.R to support his contentions would not come to the help of the assessee. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the disallowance of depreciation made by the AO.

9. The only remaining issue relates the claim of additional depreciation made by the assessee u/s 32(1)(iia) of the Act. Since we have already held that the assessee has not used the assets for business and upheld the disallowance of depreciation, the question of allowing additional depreciation does not arise. I.T.A. Nos.429 & 481/Coch/2010 12

9.1 We notice that depreciation is allowed u/s 32(1)(iia) of the Act in respect of new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31 st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing... This depreciation is allowed in addition to the normal depreciation allowed u/s 32(1) of the Act. Hence it is christened as additional depreciation in the common parlance. Both the tax authorities have held that the production and broadcasting of programmes does not result in manufacture or production of article or thing and accordingly they have rejected the claim of additional deduction made by the assessee.

9.2 Before us, the Ld A.R contended that the additional depreciation is assessee specific and not asset specific, since the section uses the words

an assessee engaged in the business of manufacture or production of any article or thing

. That is to say, according to Ld A.R, if the assessee is engaged in the business of manufacture or production of any article or thing, he would be entitled to claim deduction of additional depreciation u/s 32(1)(iia) in respect of all the assets purchased by it, even if those assets are not used for the purpose of production or manufacture of articles or things. Since the assessee herein is also engaged in the business of publishing news papers and magazines, the Ld. A.R contended before us that the assessee should be considered as having engaged in the business of manufacture or production of article or thing and accordingly the additional depreciation should be allowed on FM radio equipments.

9.3 We are unable to agree with the said contentions of the assessee. The object of allowing additional depreciation, an accelerated depreciation, is to encourage new investments. This is clear from reading of Memorandum explaining the provisions in the Finance Bill, 2005 (273 ITR (St.) 205). Further the proviso to sec. 32(1)(iia) specifically excludes old machinery or plant and machinery or plant which are installed in office premises or residential accommodation, office appliances, road transport vehicles. It can be seen that the proviso lists out machineries (and not assessees) I.T.A. Nos.429 & 481/Coch/2010 13 which are not eligible for deduction u/s 32(1)(iia) of the Act, even if the assessee is engaged in the manufacture or production of articles or thing. Hence, the purpose of allowing additional depreciation u/s 32(1)(iia) is to allow deduction only on those assets, which are used for the purpose of manufacture or production of article or thing. Hence, in our view, additional depreciation is asset specific. In our view also, the FM radio operations do not result in manufacture or production of any article or thing. Further the assessee may also broadcast the programmes produced by others also. Thus, the primary objective of the assessee in FM radio business is only broadcasting only. Hence, we agree with the view expressed by Ld CIT(A) on this issue and accordingly, we uphold the order of Ld CIT(A) in rejecting the claim of additional depreciation.

10. In the result, the appeal filed by the assessee is dismissed and the appeal of the revenue stands allowed. Pronounced accordingly on 25-10-2013. sd/- sd/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 25th October, 2013 GJ Copy to:

1. M/s. Malayala Manorama Co. Ltd., K.K. Road, Kottayam.

2. The Assistant Commissioner of Income-tax, Circle-1, Kottayam.

3. The Commissioner of Income-tax(Appeals)-IV, Kochi. 4.The Commissioner of Income-tax, Kottayam.

5. D.R., I.T.A.T., Cochin Bench, Cochin.

6. Guard File. By Order (ASSISTANT REGISTRAR) I.T.A.T, COCHIN