Key Ruling on Deferred Licensing Fees and Tax Treatment

Aalap Digital Music Pvt. Ltd. Vs ACIT (ITAT Delhi)

The Delhi ITAT directed the Assessing Officer (AO) to reassess and re-do the valuation of the license fee expenditure claimed by the Assessee, allowing only the relevant amount as per law. The facts of the case are that the Assessee co., formed to commercially exploit music albums sub licensed to it through an agreement with ‘Hungama Music’, which in turn had obtained licensed rights from Zee Music. In line with the terms of the agreement, the Assessee paid during the year ‘Hungama’ a minimum upfront guarantee fee of ₹11.

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