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2017 (1) TMI 1337 - AT - Income TaxDisallowance of cost of production - Held that:- AO had added the said sum treating it as bogus expenditure,that he had not given any reason as to how and why the expenses were not genuine. To make any disallowance or to make any addition, the AO is supposed to pass a reasoned and speaking order specially when the assessee produces documentary evidences. Mere stating that expenditure incurred by an assessee is not sufficient to fasten tax liability to that assessee. In the case under consideration, the AO had not explained as to how the expenditure claimed under the head other production expenses was non-genuine. Therefore,we are of the opinion that order, passed by the FAA, needs no interference from our side. Upholding his order, we decide the first Ground of appeal against the AO. Disallowance made u/s.40A(3)- Held that:- We find that the AO had made a disallowance @20% of total expenditure on adhoc basis, that he had not given the details of expenditure that was covered by section 40A(3), that the FAA had verified the cash book and had observed that most of the expenditure were less than ₹ 20,000/-. So, in our opinion he was justified in restricting the disallowance at ₹ 10 lakhs considering the fact that there were certain expenses that were more than ₹ 20,000/-. Addition u/s.68 - Held that:- No difference with regard to miscellaneous receipts as appearing in the impounded books and regular books. The AO failed to understand the difference in presentation.The FAA has given a categorical finding of fact that,as per the table given above,entire receipt was offered for taxation by the assessee during the year under appeal. In these circumstances,there is no need to interfere with his order. Ground No.3 stands dismissed. Disallowance of expenditure - Held that:- The assessee had actually returned in its FBT return the entertainment expenses so claimed. Therefore, a further disallowance would definitely amount to double addition of the same expense. Further, we find that the AO disallowed the expenses being of personal in nature. The assessee is a private limited company, therefore, there cannot be any personal expense so far as a legal person is concerned, therefore, we do not find any reason in sustaining an addition. Addition on account of remuneration paid to the directors - Held that:- Considering the entire facts involved in this line of business, in our considerate view, the remuneration paid to the Directors was reasonable and commensurate with the services provided by them. Accordingly, we direct the AO to delete the addition made by him and also delete the enhancement done by the Ld. CIT(A). Addition on account of various expenses including payment made to junior artists and expenses related with dress/make up/ costumes/dubbing and mixing etc. - Held that:- We direct the AO to restrict the disallowance to 5% of all expenses other than expenses incurred towards payments made to junior artists. Payment made to junior artists has to be allowed fully. Thus Ground is decided in favour of the AO in part. Addition on account of proportionate cost of production by applying Rule 9A (5) of the Rules - Held that:- In the instant case, we find that all the three movies were released before 90 days from the end of the previous year. A perusal of the chart exhibited on page-542 of the paper book show that the assessee has shown aggregate income which is much higher than the cost of production of these movies. As the facts are in line with the provisions of Rule 9A(2), the entire cost of production deserve to be allowed. Accordingly, we direct the AO to delete the enhancement made by the Ld. CIT(A) Addition on account of production cost - Held that:- We find that the assessee had filed a reconciliation statement giving details of payments made by the distribution division,that the AO did not point out any discrepancy in the statement, that while determining the income of the assessee he had clubbed the incomes of all the divisions, that he did not allow clubbing the expenses of the same divisions, that he has not brought on record any proof that disputed amount was part of the inflated expenses,that during the original assessment proceedings he had considered the issue of cost of production and had not made any addition. Therefore, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. Confirming his order,we decide the effective ground of appeal against the AO. Disallowance of ₹ 3.01 crores had been confirmed in the assessment year 2007-08 - Held that:- While deciding the appeal,filed by the assessee, for the AY.2007-08(supra) we have held that the amount in question was to be assessed in that year. There is no need to quote any authority to hold that same income cannot be taxed twice.As the issue of taxability of the income in a particular year has reached finality, so, in our opinion the order of the FAA does not need any interference from our side.
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