TMI Blog2006 (4) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... vant assessment year involved in this appeal is 2001-02. 2. The only issue in the Revenue's appeal is whether payment made to distributor falls within the purview of expenditure incurred so as to attract the provisions of s. 40A(3) or not? 3. We have heard both the sides and gone through the facts of the case. The assessee has taken the Gaiety Theatre on lease from one Shri C.T. Senthilnathan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made to various distributors on various dates by cheques which were not crossed. The cheques have been en cashed by the distributors themselves. The dates on which such payments were made, names of the distributors, details of payment have been submitted before the AO by the assessee. The AO after going through these details found that a sum of Rs. 5,64,385 has been paid otherwise through crosse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the screening of the film and as per the agreement, the assessee is entitled to a fixed percentage to be calculated on that basis. This shows that the payment made to the distributors in no way can be treated as expenditure and it cannot be taken into account either for computing the GP or the net profit of the assessee. Once we cannot compute, either in the GP or in the net profit any amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an obligation by an assessee is undoubtedly not 'expenditure'. The nature of the expenditure is always determined by the nature of outgoing in the hands of the person who pays it. Simply because the payment in the hands of recipient has been considered as revenue income, not at all necessary that it will be of the same character in the hands of the person who has made the payment. Once it is held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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