TMI Blog2013 (11) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, i.e., at Rs.17.85 lacs - It would only be fair and in the interest of justice to allow assessee an opportunity to plead its case before the ld. CIT(A) qua this ground. Disallowance of expenditure in respect of expenses pertaining to electricity, professional fee, staff salary, etc – Held that:- This is not a case of a temporary lull in the business. The same stands discontinued since f.y. 2003-04, with the assessee having not commenced any new project since. In fact, by own admission, she could not do so as she had admittedly not settled her dues to several persons in relation to her last project - In fact, it was found that she to be having even no resources for being able to undertake any such project. The assessee, as it would appear, has been engaging herself in laisoning/coordination business. The film production business having been discontinued for the past several years, with no signs of revival - Assessee's claim for business expenditure does not satisfy the test of s. 37(1) r.w.s. 28 of the Act, and stands rightly disallowed – Decided against the Assessee. - I.T.A. No. 6500/Mum/2011 - - - Dated:- 14-11-2013 - Shri I. P. Bansal, JM And Shri Sanjay Arora, AM,JJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. 3.1 The case of both the parties before us was much the same. The amount under reference is payable to 18 parties, being artists, technicians, etc. in the main, engaged in the production of feature films. The party-wise details of the amounts due are listed at pages 1 2 of both the assessment and the appellate order. The expenditure having been claimed as a deduction for A.Y. 2004-05, cessation of liability in its respect is liable for being added u/s.41(1). The assessee's claim is that there has been no cessation of liability, which the assessee owns, though had not for various reasons been able to pay, so that it outstands. Further, even as explained before the authorities below, some of the parties have approached the Federation of Western India Cine Employees (FWICE), which acts as an arbitrator between the members of different associations. Unless the assessee settles all her dues, she would not be able to commence her next project. 3.2 The dispute between the parties, as is apparent, revolves around whether the assessee has in fact obtained any benefit by way of remission or cessation of liability/s in respect of the impugned expenditure, incurred during, and cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y subsists, i.e., as at the relevant year-end. This, it would be seen, also corresponds with the settled position in law that the onus to prove its return, and the claims preferred thereby, is only on the assessee (refer: CIT vs. Calcutta Agency Limited [1951] 19 ITR 191 (SC)). The assessee, per its accounts, which form part of its return, claiming the liability outstanding from an earlier period to subsist for the current year, it is well within the power of the assessing authority to question the assessee with regard thereto, and where so done, the assessee is obliged to establish its existence. The matter would thus need to be factually determined on the conspectus of the facts and circumstances of the case, including the conduct (of the parties) and the surrounding circumstances. Of-course, the onus cannot extend to proving a negative, as where both the assessee and the creditor reflect the debt in their respective accounts, so that it is not open for the Revenue to contend that, even so, the liability, being outstanding for a number of years, has since ceased, until of-course it has justifiable reasons to believe that the same is on account of an arrangement between the two, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , an affirmation of the debt, duly confirmed by the assessee, would operate to revive the limitation period for legal enforcement, so that they only stand to gain by it, and would readily furnish the same. The confirmation of the debt per the statement of account in the case of M/s. Adlabs Films Ltd. is also of a much earlier date. The assessee's claim of her inability to start another project until she repays her creditors is in the facts and circumstances of the case of little moment. This is as, firstly, the claim is unsubstantiated. Two, even so, it applies, if at all, to four parties (for a total of Rs.4.02 lacs) out of a total of Rs.35.02 lacs. Thirdly, the assessee's capital as per its balance-sheet in the relevant proprietary concern, M/s. Righ Image International (the firm set up for production business) is negative, so that she has no resources, and is in no position to start a project. In our clear view, the assessee has not been able to discharge the onus cast on it. 3.4 The assessee before us has however made some claims with regard to the payment to some creditors (11), i.e., for an aggregate of Rs.13.34 lacs, including for Rs.4.02 lacs qua four parties and Rs.5,94, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der it fit and proper that the matter is restored back to the file of the assessing authority to decide the matter by issuing definite findings of fact, and after allowing due opportunity to establish its case in the matter to the assessee. We decide accordingly. 4. The second ground of appeal is in respect of a similar addition u/s.41(1) in respect of an advance from a company by the name M/s. Fairdeal International P. Ltd. (FIPL). The balance-sheet of the assessee's proprietary concern, M/s. Right Image International, reflecting a liability, outstanding since financial year (f.y.) 2003-04 in the name of the said company, was questioned in its respect during the course of assessment proceedings. The assessee explained that as per the Agreement arrived at between the parties (per an MOU dated 18.10.2003), of the Rs.75 lacs received from the said company against distribution and other theatrical rights for the film 'Raja Bhaiya', Rs.70 lacs was to be adjusted against its sale price, and the balance Rs.5 lacs was to be treated as an advance to be adjusted against distribution and other rights for any other future production by the assessee or any of its sister concerns or family me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it constitutes a trade surplus, cannot under the circumstances be faulted. Though the assessee has not written back the amount in accounts, as was the case in CIT vs. T.V. Sundaiam Iyengar Sons Ltd. [1996] 222 ITR 344 (SC) and CIT vs. Karam Chand Thapar [1996] 222 ITR 112 (SC), that fact by itself cannot be conclusive of the matter; it being trite that the treatment accorded by the assessee in its books is not determinative of the matter inasmuch as the same may not in all cases truly represent the true state of affairs. At the same time, it may well be that the creditor also continues to reflect the debt in its accounts, treating it as a receivable, in which case it cannot be said that there is no outstanding liability in its respect, and that the amount has become a trade surplus for the assessee. The onus to exhibit that the liability subsists as at the year-end (31.03.2008) is on the assessee. At this stage we may also refer to the case of Uttam Air Products (P) Ltd. vs. Deputy CIT [2006] 99 TTJ 718 (Delhi) referred to by the assessee. In that case the assessee had discharged the onus to prove the liability as an existing liability by furnishing the letter dated 10.04.1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee being unable to substantiate its said explanation, the addition stood effected and sustained. Before us, the ld. AR would submit that the assessee is now in a position to adduce evidence in support of its claim/s, while the ld. DR would support the orders of the Revenue authorities. Though we would normally be disinclined to restore the matter; the assessee having not made any prima facie case before us, we consider that in view of our having decided to do so qua the assessee's ground no. 2, it would only be fair and in the interest of justice to allow it an opportunity to plead its case before the ld. CIT(A) qua this ground as well. Further, it also needs to be clarified as to how the amount, admittedly not credited to the P L A/c, has been adjusted in accounts; the assessee's claim being essentially of the source being accounted. Needless to add, any fresh evidence furnished by the assessee shall be subject to being verified and controverted/met by the A.O. We decide accordingly. 8. The last and the fourth ground is in respect of disallowance of expenditure in the sum of Rs.1,94,136/-. The same is in respect of expenses pertaining to electricity, professional f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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