TMI Blog2015 (5) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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) TMI 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 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.- Decided partly in favour of assessee. Disallowance of expenditure on purchase of paintings - Held that:- Rule 9A is a complete code in itself. The expenditure incurred on the production of film is allowed only under Rule 9A. Such expenditure 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. The observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance is unjustified and may please be deleted. Ground No.2: 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 ₹ 11,698/- out of depreciation on car claimed at ₹ 1,16,981/-. The appellant prays that the said disallowance is 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 adhoc disallowance @10% made by the Ld. A.O. of ₹ 1,11,628/- out of ₹ 11,16,282/ - claimed as costume and dresses expenses. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No 5: On the facts and in the circumstances of the case and in law, the Hon'ble CIT (A) erred in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified 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 of dancers and dance expenses. The appellant prays that the said disallowance is unjustified and may please be deleted. Ground No. 13: 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. A.O. ₹ 44,10,749/- out of expenditure of ₹ 2,94,04,996/- incurred as setting expenses. The appellant prays that the said disallowance is unjustified and may please be deleted. 3. The assessee in its 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses incurred on the motor car, there is personal element is involved and similarly the family members might have utilized the costumes and dresses for their personal use. 6. We have considered rival contentions, carefully gone through the orders 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 made adhoc disallowance of expenses @15% on the ground that personal element in such expenses cannot be ruled out, which was later confirmed by the CIT(A). On appeal before the Hon‟ble ITAT, it was held as under :- 6. It is important to bear in mind the fact that issue before us is not whether costume and make up expenses constitute admissible deduction, because the Assessing Officer himself has allowed deduction in respect of the same, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure 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 ₹ 2,25,213/-. 9. We have considered rival contentions and found that the 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., 322 ITR 81. 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 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. By the impugned order, the CIT(A) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % on various expenses incurred for the movie Kavi Alvida Na Kehna‟, which are confirmed by the 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 financial data which would be helpful in justifying the claim of expenses under various heads. It is only bills and vouchers which would serve the purpose of verifying the expenses and accordingly, all the bills and vouchers were produced for verification. However, the AO did not agree with the assessee‟s contention and made an adhoc disallowance of 15% of expenditure incurred on junior artists and technicians, costumes and dresses, makeup and hairdressers, dubbing, sound recording, dancers and dance expenses, setting expenses etc. 18. By the impugned order, the CIT(A) confirmed the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r finding has been given by the Tribunal in the case of M/s Dharma Production Pvt. Ltd. that these technical documents are not required to be maintained. Accordingly, we do not find any merit for adhoc disallowance merely for the reasons that such technical documents relating to production of films were not produced by the assessee. Accordingly, we direct the AO to delete the adhoc disallowance so made. 21. As the facts and circumstances during the assessment year 2009-2010 are pari materia, following the reasoning given hereinabove, 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 of telephone expenses is restricted to 5%. In the selling expenses there is no personal element, accordingly, we do not find any merit for adhoc disallowance of 10% amounting to ₹ 1,44,009/- out of selling expenses of ₹ 14,40,009/- incurred by the assessee. 22. In the result both appeals of the assessee are allowed in part, in terms indicated herein above. Order pronounced in the open court on 15/04/2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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