SC dismisses MSM plea against I-T dept

The Supreme Court today dismissed the petition of Multi Screen Media (MSM) challenging a notice by the Income Tax (I-T) department, which sought reassessment of four year old returns filed by the company because of a possible mistake on the part of the authorities.

A Bench comprising Chief Justice S H Kapadia and Justice K S Radhakrishnan dismissed the petition of MSM challenging that the tax department can not issue notice to it for reassessment of its tax returns filed four years ago.

Earlier, the Bombay High Court had also rejected MSM's plea that I-T department can not issue notice in 2009 for the reassessment of the tax returns filed for financial year 2004-05.

MSM, formerly known as SET India is an Indian subsidiary of Sony Entertainment Television and operates channels under the name Sony Entertainment TV.

In its assessment for the financial year 2004-05, MSM had claimed tax benefits for expenditure on advertisements, sales promotion, market research and publicity.

The entertainment firm claimed that it was done for the purpose of business and could be deducted under section 37(1) of the Income Tax Act, 1961.

However, four years after that, I-T department decided to reassess MSM's return and issued notice on March 25, 2009.

The department said that there was a reason to believe that the Assessing Officer had made a mistake in 2005, by possibly extending more relief under the advertisement and publicity expenses in the assessment year of 2004-05.

According to the department, MSM had debited Rs 26 crore for advertisement and publicity expenses, Rs 2.83 crore for market research and Rs 6.42 crore as dealer incentives. Consequently, it has also debited selling and distribution charges amounting in all to Rs 26.01 crore.

The Bombay High Court had dismissed the broadcaster's plea observing, "In our considered view, the I-T department did have tangible material to reopen the assessment under Section 147 of the Act and to form a reason to believe that income had escaped assessment."