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2017 (3) TMI 1375 - AT - Income TaxDisallowance towards exhibition of films taken on minimum guarantee basis on advertisement and other related expenses - Held that - The claim of assessee cannot be allowed in view of the Explanation below the Rule 9B(1) of the Income Tax Rules 1962. The assessee incurred expenses in connection with advertisement of film where the film rights have been acquired on a minimum guarantee basis by a film distributor. Further it is also brought on record that as per the agreement entered between film producers and the assessee the expenses related to the advertisement has to be incurred by the producers therefore it was rightly disallowed by the lower authorities and there is no liability as the assessee is not liable to incur any such expenditure on this count and it is the duty of the producer to incur the expenditure. Accordingly we upheld the order of the lower authorities. Hence this ground raised by the assessee is rejected. Disallowance of agricultural income - assessee did not produce any evidence for its nature of being an agricultural income and that income is treated by the Revenue as income from other sources - Held that - In this case the assessee stated that he owns vast area of agricultural land there was no iota of evidence regarding cultivation carried on by the assessee with reference to nature of crop grown labourers employed or any details of expenditure incurred or products sold. In the absence of these particulars it is not possible for Department to give benefit of agricultural income to the assessee. Since the assessee placed no evidence regarding agricultural income the burden cast upon the assessee not shifted to the Revenue authority as to prove that there is no agricultural income. Accordingly we upheld the order of lower authorities. Therefore this ground raised by the assessee is dismissed. Levy of penalty under section 271(1)(c) - disallowance of expenditure claimed by the assessee towards advertisement - Held that - The assessee claimed an expenditure towards advertisement for the assessee is not entitled. In respect of this the assessee made an effort to claim that expenditure. As rightly pointed out by the ld.D.R had it been no scrutiny the assessee would have escaped and would have got deduction towards this expenditure and in our opinion this is a false claim by the assessee and it is not a wrong claim so as to apply that ratio laid down by the Supreme Court in the case of Relaince Petroproductgs (P.) Ltd.(2010 (3) TMI 80 - SUPREME COURT ). Accordingly we confirm the order of Ld.CIT(A) and the restore the order of the AO and confirm the levy of penalty on this issue. Regarding agricultural income if the assessee carried on agricultural operations at least there would have been certain receipts of sale of agricultural products or evidence regarding expenditure incurred. With reference to expenses relating to agricultural activities the assessee is not having any evidence we are of the opinion that assessee made an attempt to show the non agricultural income as agricultural income and because of scrutiny the AO is able to find out the claim as false and the same was considered for income from other sources. Accordingly this kind of conduct of the assessee warrants levy of penalty under section 271(1)(c) of the Act which is nothing but furnishing inaccurate particulars of income and levy of penalty under section 271(1)(c) of the Act is confirmed. Non deduction of TDS on film distribution commission - addition u/s 40(a)(ia) - contention of the ld.A.R is that net collection from the distribution of film was handed over to the assessee by M/s.Geetha Films after retaining 5% of the collections as distribution commission for their services and therefore the provisions of the Sec.40(a)(ia) of the Act is not applicable as there was no payer and payee relationship - Held that - In our opinion the argument of assessee is devoid of merits. Whenever the assessee has claimed any expenses as commission in terms of Sec.40(a)(ia) of the Act the assessee is duty bound to deduct the TDS and paid the TDS to the Government exchequrer before the due date of filing the return of income. The assessee is not in a position to place any evidence with this respect and the ld.A.R argued that there is no relation between the payee and payer between the the Geetha Film distribution and the assessee. This argument holds no water. However we are inclined to remit the issue to the file of AO in view of the judgement of Special Bench in the case of Merilyn Shipping and Transport Vs. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM to examine whether the payment is already made and it is not outstanding at the end of the close of this financial year relevant to assessment year 2010-11 and be already paid no disallowance is warranted under Sec.40(a)(ia) of the Act Disallowance being 20% of the distribution expenses claimed - Held that - Admittedly the assessee had not produced the bills vouchers and other related supporting evidences. In our opinion the disallowance of distribution expenses @ 20% made by the AO is on higher side. Considering the nature of distribution we are inclined to arrive at allowing 10% of the distribution expenses against 20% made by the ld. Assessing Officer as not supported by the vouchers.
Issues Involved:
1. Disallowance of expenses incurred towards film advertisement. 2. Disallowance of agricultural income. 3. Levy of penalty under section 271(1)(c) of the Income Tax Act. 4. Disallowance of film distribution commission due to non-deduction of TDS. 5. Disallowance of a percentage of distribution expenses due to lack of supporting vouchers. Issue-wise Detailed Analysis: 1. Disallowance of Expenses Incurred Towards Film Advertisement: The assessee incurred expenses amounting to Rs. 45,84,082 towards the advertisement of films acquired on a minimum guarantee basis. The AO disallowed these expenses under Rule 9B of the Income Tax Rules, 1962, which was upheld by the Ld.CIT(A) on the grounds that the agreements indicated that advertisement expenses were to be borne by the producer. The Tribunal confirmed this disallowance, citing the Explanation below Rule 9B(1) which disallows such expenses when film rights are acquired on a minimum guarantee basis. 2. Disallowance of Agricultural Income: The assessee claimed agricultural income of Rs. 7,45,000, which was disallowed by the AO due to a lack of evidence supporting the agricultural nature of the income. The Ld.CIT(A) upheld this disallowance, and the Tribunal concurred, noting the absence of evidence regarding cultivation, crop details, labor, or expenses, thus treating the income as 'income from other sources'. 3. Levy of Penalty Under Section 271(1)(c) of the Income Tax Act: The AO levied a penalty for disallowed claims of Rs. 71,43,420 (advertisement expenses) and Rs. 7,45,000 (agricultural income). The Ld.CIT(A) upheld the penalty for the agricultural income but deleted it for the advertisement expenses, considering it a wrong claim rather than a false one. The Tribunal, however, reinstated the penalty for advertisement expenses, distinguishing it as a false claim, thus confirming the penalty for both disallowances. 4. Disallowance of Film Distribution Commission Due to Non-Deduction of TDS: The assessee claimed an expenditure of Rs. 24,80,664 towards film distribution commission without deducting TDS, leading to disallowance under Sec.40(a)(ia). The Tribunal remitted the issue back to the AO to verify if the payment was outstanding at the end of the financial year, referencing the judgments in the cases of Merilyn Shipping and Transport and Shri N.Palanivelu. 5. Disallowance of a Percentage of Distribution Expenses Due to Lack of Supporting Vouchers: The AO disallowed 20% of the distribution expenses due to the absence of supporting vouchers. The Tribunal found this disallowance excessive and reduced it to 10%, considering the nature of distribution expenses. Conclusion: The Tribunal dismissed the assessee's appeal regarding the disallowance of advertisement expenses and agricultural income, upheld the penalty under section 271(1)(c) for both issues, remitted the issue of TDS on distribution commission back to the AO, and partially allowed the appeal concerning the disallowance of distribution expenses by reducing it to 10%.
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