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Shri Karan Yash Johar, (Prop. M/s Dharma Productions) Versus Dy. Commissioner of Income Tax

[2015] 44 ITR (Trib) 589 (ITAT [Mum]) - Disallowance of expenditure incurred on costumes and dress - Held that:- Similar addition made in the case of assessee in the assessment years 2006-07 & 2008-09 was deleted by the CIT(A). In the year under consideration, the CIT(A) has confirmed the disallowance of costumes and dress expenses on the assumption that there could be possibility of personal usage in such expenses. Keeping in view the assessee‟s nature of business being anchor, we do not .....

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rule 8D - Held that:- AO has mechanically applied the provisions of rule 8D, which is not applicable in the relevant assessment year 2007-08 under consideration as per verdict of Hon‟ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd., [2010 (8)77 - BOMBAY HIGH COURT]. Keeping in view the totality of facts and circumstances, where the AO has not recorded any finding to substantiate that any expenditure has been incurred for the purpose of earning the exempt income, we restri .....

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urred and irrespective whether it is capital in nature or revenue in nature. Unlike Section 37(1) of the Act, Rule 9A does not lay down any such restrictions. Once it is established that paintings are a part of Cost of Production, the same should be allowed as deduction. The observation of the CIT(A) to the effect that paintings was for personal usage is not based on any evidence on record. Accordingly, we direct the AO to delete the addition on account of expenditure incurred on purchase of pai .....

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. However, a clear finding has been given by the Tribunal in the case of M/s Dharma Production Pvt. Ltd. [2013 (11)319 - ITAT MUMBAI] that these technical documents are not required to be maintained. Thus following the reasoning given during the assessment year 2009-2010 we restrict the disallowance out of the motor car expenses and depreciation on motor car to the extent of 5%. The adhoc disallowance made out of costumes and dresses expenses are hereby deleted. The disallowance made on account .....

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r Beerla ORDER Per R.C. Sharma, AM : These are the appeals filed by the assessee are directed against two separate orders passed by the ld. CIT(A) - 40, Mumbai both dated 10-01-2013 for the assessment years 2007-08 & 2009-10 in the matter of order u/s 143(3) of the Income Tax, 1961. 2. The assessee in its appeal for assessment year 2007-08, has taken the following grounds :- Ground No.1: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming .....

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s unjustified and may please be deleted. Ground No 3: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adhoc disallowance @10% made by the Ld. AO. of ₹ 19,176/- out of motor car expenses claimed at ₹ 1,91,755/-. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No 4: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adh .....

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may please be deleted. Ground No.6: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the disallowance made by the Ld. A.O. of ₹ 94,53,684/- incurred on purchases of painting for the purpose of business, by treating the same as capital expenditure. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No.7: Without prejudice to Ground No.6, on the facts and in the circumstances of the case an .....

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artists and technicians. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No.9: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adhoc disallowance @15% made by the Ld. AO of ₹ 21,86,227/- out of expenditure of ₹ 1,45,74,847/- incurred in respect of costumes & dresses. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No. 10: O .....

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e by the Ld. AO. of ₹ 5,55,846/- out of expenditure of ₹ 37,05,639/- incurred on account of dubbing, song recording & mixing expenses. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No. 12: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adhoc disallowance @15% made by the Ld. AO. of ₹ 18,74,668/- out of the expenditure of ₹ 1,74,97,785/- incurred in respect .....

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appeal for assessment year 2009-10, has taken the following grounds :- Ground No.1: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adhoc disallowance @10% made by the Ld. AO. of ₹ 2,46,722/- out of motor car expense & depreciation on motor car of ₹ 24,67,220/- (8,88,898+15,78,322). The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No.2: On the facts and in the circumstanc .....

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[Rs. 4,30,383 (-) ₹ 37,323] claimed as telephone expense. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No.4: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in confirming the adhoc disallowance @10% made by the Ld. A.O. of Rs.l,44,009/- out of ₹ 14,40,091/- claimed as selling expense by treating it as personal in nature. The appellant prays that the said disallowance is unjustified and may .....

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on. During the course of scrutiny assessment for A.Y. 2007-08, the A.O. made adhoc disallowance of ₹ 3414/- out of car insurance, ₹ 11,698/- out of depreciation on car, ₹ 19,176/- out of motor car expenses, ₹ 1,11,628/- out of costume and dress expenses, ₹ 2,67,722/- out of payments made to junior artists and technicians, ₹ 21,86,227/- out of costumes and dress expenses, ₹ 74,819/- out of makeup and hairdressers expenses, ₹ 5,55,846/- out of dubbin .....

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of the authorities below and found that assessee is a TV anchor who earns substantial part of his income from anchoring. The profession of the assessee requires him to be presentable while hosting the TV show and, therefore, expenditure incurred by the assessee for costumes and dress materials are for the purpose of business only. Similar issue has been decided by the ITAT in the case of Ameesha A. Patel in ITA No.5883/Mum/2009 for A.Y.2004-05, dated 28-1-2011. Even in this case, the AO had mad .....

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ether a part of such expenses incurred by the assessee could be disallowed on the ground that these expenses are personal in nature. Once the Assessing Officer accepts that the make up and costume expenses are incurred wholly and exclusively for the purposes of assessee‟s profession and are not in the nature of personal expenses of the assessee as is the condition precedent for allowing the expenses under section 37(1), it cannot be open to him to treat the same as personal expenses. There .....

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he Assessing Officer himself has allowed major part of such expenditure. We have also noted that all the bills, vouchers and supporting evidences are duly furnished before the AO and infirmity has been found in these evidences. It is not even revenue‟s case that the assessee has not shown any personal expenses, such as on her clothes, at all. In view of these discussions, and bearing in mind entirety of the case, we uphold the grievances of the assessee. We, therefore, direct the AO to del .....

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T(A) for disallowing expenditure incurred on costumes and dress which was incurred wholly and exclusively for the purpose of business. 7. So far as disallowance on account of car insurance, depreciation on car, motor car expenses are concerned, keeping in view the nature of assessee‟s business, we restrict the disallowance to 5% of the expenditure so incurred. 8. In ground No.5, the assessee is aggrieved for disallowance confirmed by the CIT(A) u/s.14A read with rule 8D amounting to ₹ .....

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ing the exempt income, we restrict the disallowance to the extent of ₹ 1,00,000/- insofar as the entire exempt income was on account of tax free bond, shares, PPF etc. 10. In ground No.6, the assessee aggrieved for disallowance of expenditure on purchase of paintings for the purpose of business. The AO has discussed the issue at para 6 of his assessment order. After referring to Section 37(1), the AO observed that expenditure was capital in nature, therefore, not allowable u/s.37(1). 11. B .....

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assessee has claimed the cost of painting under Rule 9A of the I.T.Rules, 1962, according to which cost of production of a feature film is allowed as deduction while computing the profit and gains of business and profession. The said cost of production is defined in the Explanation to clause (1) of Rule 9A, which states as under : cost of production , in relation to a feature film, means the expenditure incurred on the production of the film, not being- (a) the expenditure incurred for the prep .....

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nditure is allowable as per the provisions of Rule 9A, irrespective of the year in which such expenditure is incurred and irrespective whether it is capital in nature or revenue in nature. Unlike Section 37(1) of the Act, Rule 9A does not lay down any such restrictions. Once it is established that paintings are a part of Cost of Production, the same should be allowed as deduction. 14. The observation of the CIT(A) to the effect that paintings was for personal usage is not based on any evidence o .....

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e CIT(A). These disallowance were made by the AO for the reason that the various records related to production in the form of Continuity Reports, Call Sheets, Rehearsal book etc. were not produced. 17. The AO has discussed the issue at para 9. It was explained before the A.O. that these documents asked by the AO are prepared at the time of shooting of the film and the same are destroyed once the production activity is completed. It was also explained that these documents do not provide any finan .....

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dance expenses, setting expenses etc. 18. By the impugned order, the CIT(A) confirmed the disallowance, against which the assessee is in further appeal before us. 19. We have considered rival contentions and found that expenses so claimed are required to be allowed as per provisions of Rules 6F, which prescribes the list of books of accounts required to be maintained by professionals. The documents called for by the A.O. are not mentioned in the list prescribed under rules 6F. The issue is cove .....

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. Further, a clear finding has been given that the documents called for by the A.O. are maintained for the purpose of shooting and are not part of the accounts book. That once the shooting of a film is over there is no purpose to keep such a record which is otherwise not feasible. However, subsequently, relying on the decision of ITAT in the case of Yash Raj Films Pvt Ltd. v. ACIT bearing ITA No. 6350/M/2010, dated 05.04.2013, the disallowances were restricted to 5%. 20. From the record we found .....

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