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2015 (3) TMI 222 - ITAT MUMBAIDiallowance u/s 40(a)(i) - disallowance of production expenses - Held that:- expenditures were incurred on production of films. The genuineness of expenditure was not doubted. The CIT(A) also observed that AO has not cited a single instance of non-variable expenditure where self made vouchers existed. Without giving any cogent reason he has restricted the disallowance to 50% of what the AO has made. Since the expenditure was incurred for the purpose of business, considering the similar issue decided by the Tribunal in assessee's own case in earlier and keeping in view the totality of the facts and circumstances of the case, we direct the AO to restrict the disallowance to the extent of 5% of only those expenditure which have been incurred in cash as held by ITAT in assessee's own case in [2013 (11) TMI 309 - ITAT MUMBAI]. Payment was for shoot carried on abroad in course of Fast Time's Business and Fast Time has no Permanent Establishment (PE) in India, hence, its profit is taxable only in Thailand as per Article 7 of DTAA between India and Thailand. There is no dispute to the fact that the shoots were held abroad and that Fast Time Ltd. did not have any PE in India. Alternatively, the payments made for shooting, hence, the same was in respect of professional services rendered in abroad. Hence, Article 14 of DTAA will be applicable. Thus, considering the Article 14 and 7 of DTAA, we do not find any merit in the disallowance so made by the CIT(A). Payments were made to individual models for a shoot carried out in Nepal. The said payments were not chargeable to tax in India as per the DTAA between India and UK and there is no tax at source. Thus, the provisions of Section 40(a)(i) were not applicable. Since these payments for professional services of artists, therefore, covered by the Article 15 of the DTAA between India and UK. The CIT(A) has wrongly applied Article 23, which can be applied only for taxing an income i.e. not dealt with the other articles specifically. Similar proposition has been laid down by the ITAT Mumbai Bench in the case of Channel Guide India (2012 (9) TMI 95 - ITAT MUMBAI). We found that in respect of similar payments made to models from Germany, the CIT(A) has accepted the argument that no TDS was to be done on those payments. Accordingly, we do not find any merit in the disallowance made by the CIT(A) under Section 40(a)(i) - Decided partly in favour of assessee.
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