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Mr. Satish B. Kaushik Versus The Asst. Commissioner of Income Tax 11 (1) , Mumbai

Irrevocable bad debt - whether allowable as revenue expenditure - Held that:- The assessee has made efforts to recover the amount but could not recover the same for which necessary evidences are placed on record by the assessee in the paper book filed with the Tribunal. This amount has been considered to be bad debt by the assessee and has been written off in the books of account in the current assessment year under appeal. In the opinion of the assessee, the said amount has become irrecoverable .....

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ts - Held that:- In the instant case, the amount has been held by the assessee on behalf of Tips Industries Ltd. and is not being held by the assessee in his own right as the assessee can be deemed to hold the said amount in his own right on commencement of the film. No income is being generated or earned even under the cash system of accounting followed by the assessee as in the instant case the film has not commenced as per agreed terms and the amount has become refundable to Tips Industries L .....

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en the assessee is holding the said amount on behalf of Tips Industries Limited which is refundable in case of non-starting of the film as per agreed terms as per mutual understanding dated 05-02-2008. The addition made by the A.O. as confirmed by the CIT(A) is hereby ordered to be deleted - Decided in favour of assessee

Disallowance of depreciation on assets not used for the purposes of business - Held that:- We have observed that the A.O. is insisting on the commercial electricity u .....

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usiness purposes of the assessee. The assessee is also directed to bring on record cogent material/evidences to prove his contentions of business user of the afore-stated premises. The A.O. is directed to admit evidences furnished by the assessee in de-novo proceedings in his defense and the AO should consider the necessary evidences submitted by the assessee before deciding the matter on merit.Needless to say that proper and adequate opportunity of hearing in accordance with law shall be grante .....

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these properties whereby we have set aside the matter of allowability of depreciation on furniture and fixtures and on computers to the file of A.O. and directed the assessee to produce cogent evidence/material to substantiate his claim of business user of the afore-stated properties and the A.O. shall examine the same for deciding the issue of claim of depreciation and we apply the same principle in this issue also, hence, we set aside this issue to the file of A.O. for de-novo determination o .....

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These cross appeals by the Assessee and the Revenue are directed against the orders of the learned Commissioner of Income Tax (Appeals)- 3, Mumbai (Hereinafter called the CIT(A) ) dated 18-06-2012 pertaining to the assessment year 2008-09. These cross appeals are heard together and disposed of by this common order for the sake of convenience and brevity. 2. The ground raised by the assessee in the memo of appeal filed with the Tribunal reads as under:- 1. On the facts and circumstances of the ca .....

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in upholding the disallowance in respect of depreciation claimed of ₹ 2,12,184/-. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of Ld AO in treating 3 properties as Deemed to be let out. 5. That the orders of both Ld Commissioner of Income Tax (Appeals) and Ld Assessing Officer are bad in law and on facts. 3. The brief facts of the case are that the assessee carries on the business activity of acting and direction of feature film s. .....

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debt per-se shall not arise. The assessee submitted that assessee has entered into a joint venture distribution business with Prachi Narmada Films Pvt. Ltd.(hereinafter called the PNF ) in September, 2001 for the distribution of the feature film Nayak for which an amount of ₹ 10 lakhs was advanced to the PNF. This was entirely in the nature of a business transaction wherein money was advanced for a joint venture business with an intention to earn profit s out of it. The intention was neve .....

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36(2) of the Act which governs section 36(1)(vii) of the Act , a debt is to be allowed as bad-debt if it is taken into account in computing the income of the assessee of any previous year. The AO held that if the said amount has been offered to tax in any previous year then it can be written off as bad debts. The amount written off as irrecoverable is not debtors of the assessee as the assessee has given the advances. The amount which have been written off as irrecoverable are not the debtors of .....

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the balance sheet as at 31-3-2007 of the assessee are in the nature of capital advance and non recovery of the said investment can be capital loss but cannot be allowed as revenue loss, hence, the entry is passed by the assessee to reduce the burden of tax and accordingly the A.O. disallowed the same and added the same amount i.e. ₹ 4,38,385/- to the total income of the assessee vide assessment orders dated 07-12-2010 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment .....

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,020/- was incurred in which assessee s share was at ₹ 5,61,605/-. Hence , after providing for the loss suffered by the assessee , the amount of ₹ 4,38,395/- was receivable from the PNF . Since despite several reminders to the PNF, the amount was not received from the PNF and which was written off by the assessee as bad debts in the impugned assessment year under appeal. However, inadvertently, the advance given was shown in balance sheet as Investment instead of loans and advances . .....

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eafter shown as investment in balance sheet and the amount in question is investment in nature and not in the nature of advance or loans. This amount was never taken in to account while computing the income of the assessee. The CIT(A) held that the loss suffered in the business at ₹ 5.61 lakhs had occurred in the assessment year 2002-03 which might have been claimed and allowed in that year i.e. the assessment year 2002-03. Therefore, the loss of the assessment year 2002-03 cannot be allow .....

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s, the CIT(A) upheld the findings of the AO vide orders dated 18-06-2012. 6. Aggrieved by the orders dated 18-06-2012 passed by the CIT(A), the assessee is in appeal before the Tribunal. 7. The ld counsel for the assessee submitted that the advance of ₹ 10 lacs was paid to the PNF in 2001 for buying the film Nayak . The assessee was having 25% share in the film Nayak . The Ld. Counsel for the assessee submitted that the loss incurred in this film was ₹ 5,61,605/- which was claimed by .....

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2001 which is placed at paper book page 83 & 84.The ld. Counsel also drew our attention to the various letters and reminders sent by the assessee to the said PNF for refund of the amount ₹ 4,38,395/- which is placed at paper book page nos. 85 to 89. The ld. Counsel also drew our attention to the balance sheet for the years 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08, copy of which are placed in the file to substantiate that the advance of ₹ 10 lacs was shown in the bo .....

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e of business of buying share of distribution rights of a movie and it should be allowed as deduction. The amount advanced to M/s PNF was duly declared and disclosed to the Revenue in the return of income filed for the assessment 2002-03. He submitted that the case of the assessee was selected for scrutiny for the assessment year 2006-07 whereby this investment was reflected in the balance sheet and the Revenue has assessed the same u/s 143(3) of the Act vide orders dated 15-12-2008. The ld. Cou .....

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the rival parties. We have observed that the assessee is film actor and director of feature films. The assessee has made investment with PNF of ₹ 10 lakhs in the year 2001 whereby the assessee had 25% share in feature film Nayak in the territory of Central India. The assessee was entitled for 25% of share in this venture. The assessee has got share of loss of ₹ 5,61,605/- which was offered for taxation in the assessment year 2002-03 and thereafter as per the facts emanating from the .....

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nt but could not recover the same for which necessary evidences are placed on record by the assessee in the paper book filed with the Tribunal. This amount has been considered to be bad debt by the assessee and has been written off in the books of account in the current assessment year under appeal. In the opinion of the assessee, the said amount has become irrecoverable and has been written off in the books of accounts maintained by the assessee. In our considered view , the assessee has fully .....

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has received an advance of ₹ 25 lacs which is reflected in the balance sheet under the head Current Liabilities and Provisions which is in the nature of advance received from Tips Industries Limited. The assessee was asked to explain as to why advance received from Tips Industries Limited should not be treated as income as assessee is following cash method of accounting. The assessee explained that a sum of ₹ 25 lacs was received during the year from Tips Industries Ltd. for accepti .....

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any. The A.O. observed that no TDS has been deducted by the Tips Industries Ltd. The assessee submitted that no film has commenced and the Tips Industries Ltd. is demanding refund of the advance paid to the assessee. This transaction is purely in the nature of loan and not towards remuneration and this amount is not included in the income of the assessee. The A.O. rejected the contentions of the assessee and held that the assessee is following cash system of accounting and any income becomes ass .....

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ounting and accordingly the A.O. added the said amount of ₹ 25,00,000/- to the total income of the assessee vide assessment orders dated 07-12-2010 passed by the AO u/s 143(3) of the Act. 11. Aggrieved by the orders dated 07-12-2010 passed by the AO u/s 143(3) of the Act , the assessee filed first appeal with the CIT(A). 12. Before the CIT(A) , the assessee submitted that the advance received is in the nature of refundable deposit/earnest money and to show the commitment to the director th .....

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assessee is following cash system of accounting, the principle of cash system of accounting is that the revenue is recognized on the basis of cash receipts and earned only when cash is received irrespective of fact when and how the services were to be performed or goods delivered. Since the assessee has received amount on account of signing of the contract agreement for various agreements and works to be performed, therefore the amount received is to be recognized as income of the assessee and a .....

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2-2008 entered into by the assessee with the Tips Industries Ltd and based on the said mutual understanding an amount of ₹ 25 lacs was received by the assessee wherein it was clearly mentioned that the amount of ₹ 25 lacs paid to the assessee is an advance on signing of this mutual understanding dated 05-02-2008 and this advance is not towards remuneration but only for accepting the directorial assignment. It was also mentioned vide cl. 4 and 5 of the mutual understanding that the ad .....

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nataka High Court in the case of CIT v. Shankaranarayan Construction Co. (1992) 197 ITR 688 (KAR), upon the decision of Mumbai-Tribunal in the case of Robin Nana Bhai Bhatt v. ACIT (2014)29 ITR (Trib.) 531,decision of the Hon ble Delhi High Court in the case of CIT v. Consulting Engineering Services (India) Limited (2001)250 ITR 849(Del. HC). 15. The ld. D.R., on the other hand, relied on the orders of authorities below. 16. We have considered the rival contention and also perused the material a .....

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assessee was paid ₹ 25 lacs with the clear understanding that advance is not remuneration but paid only for accepting the directorial assignment and the advance shall be adjusted against the remuneration only on the commencement of the first film and in the event of not starting the first film, the assessee would refund the advance immediately. The assessee is following cash system of accounting whereby the income is taxed based upon the receipt of income whether the services are rendered .....

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mited. It is an undisputed fact that the assesssee did not start the film as per mutual understanding dated 05-02- 2008 . It is stated that Tips Industries Limited is demanding their money back due to non-starting of the film by the assessee. In the instant case, the amount of ₹ 25,00,000/- has been held by the assessee on behalf of Tips Industries Ltd. and is not being held by the assessee in his own right as the assessee can be deemed to hold the said amount in his own right on commencem .....

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own right as per the agreed terms of conditions as agreed vide mutual understanding dated 05-02-2008 as the assessee will be deemed to appropriate the said amount or hold the said amount in his own right only on the commencement of film and till then the assessee is holding the said amount of ₹ 25,00,000/- on belhaf of Tips Industries Limited which is refundable in case of non-starting of the film as per agreed terms as per mutual understanding dated 05-02-2008. The addition made by the A .....

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ue as self occupied property and rest of the assets i.e. three afore-stated flats are claimed by the assessee for being used for the purpose of business. The A.O. asked the assessee as to whether electricity is being charged at commercial rates as if it is a commercial property as rate of electricity are different for commercial properties vis-à-vis residential properties. The assessee replied that the assessee is mostly working on multiple projects at one time in his capacity as an actor .....

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ax. (b) EVERSHINE GREENS:- This property is being used by the assessee as office premises for himself for his creative activities as an Actor, Director etc. for conducting story sessions, photo shoots, rehearsals etc. (c) TRANQUIL TREAT :-This property is also being used as godown and storage space for various materials, costumes, scripts other film and theatre stage related material. (d) RAJ CLASSIQUE :- Though used for residence, this property is also used for creative activities, business dea .....

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ss to whom it is let out. Hence, ₹ 90,378/- claimed as depreciation on various block of assets is hereby denied and added back to the total income of the assessee. b) Evershine Greens:- The assessee failed to produce proof as to whether the electricity is being charged as commercial rates if the property is used for commercial purpose as claimed by the assessee. Also it is ironical that no depreciation is being claimed on the flat as such but depreciation is being claimed on the block of f .....

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puters. Thus depreciation of ₹ 39,337/- is denied and added back to the total income. d) Raj Classique:- The assessee himself claims that this is his self occupied property. But again the assessee has claimed depreciation is on the block of furniture and fixture and computers which is not allowable as it is a self occupied property. Also it is ironical that no depreciation is being claimed on the flat as such but depreciation is being claimed on the block of furniture and fixture and compu .....

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submitted that section 32(1) provides that depreciation is allowable in respect of plant or furniture owned and used in business or profession on the written down value. It is of no consequence whether entire property is used for the purpose of business or not. With regard to Saidwar property, the assessee stated that the assessee is director of M/s. Chitrayug Production Pvt. Ltd. which was previously engaged in production of film and considering that the company is dormant, hence a small part .....

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ot being done from regular office is done at a calm and serene place. With regard to the Tranquil Treat, it was submitted that this property was being used as godown and storage place for various material, costume, and thus being used for business and furniture and fixtures also being used for business purpose hence, depreciation on the same should be allowed. With respect to the Raj Classique property, it was stated that while this property is being used for residence, a part of is also used fo .....

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me has been shown, therefore, the A.O. was justified in making disallowance of depreciation on this property. With respect to Evershine Green property, it was found by the CIT(A) that the assessee has not able to produce any evidence that this property was being used as commercial property by providing electricity bill, commercial rate etc. Further no depreciation is being claimed on the flat but depreciation is being claimed on furniture and fixtures, the CIT(A) vide orders dated 18-06-2012 hel .....

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hereon and accordingly the ground raised by the assessee was dismissed by the CIT(A) vide orders dated 18-06-2012. 20. Aggrieved by the order dated 18-06-2012 of the CIT(A) , the assessee is in appeal before the Tribunal. 21. The ld. Counsel for the assessee submitted that depreciation has been claimed of by the assessee of ₹ 2,12,184/- which was disallowed by the A.O. and same has been confirmed by the CIT(A). The ld. Counsel submitted that the assets are part of block of assets in which .....

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. In support, he relied on the decision of the Mumbai-Tribunal in the case of E-City Entertainment (India) Pvt. Ltd. v. Addl. CIT, [2013] 24 ITR (Trib) 73 (Mumbai) and the decision of Mumbai-Tribunal in the case of G.R. Shipping Ltd. v. DCIT in ITA No. 822/Mum/05 for the assessment year 2001-02 dated 17th July 2008 which was confirmed by the Hon ble Bombay High Court in Income Tax Appeal No. 598 of 2009 dated 28th July, 2009. The ld. Counsel also relied on the decision of the Hon ble Delhi High .....

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have been utilized for the purpose of his business.The assessee is in the business of acting , direction and film production. The assessee has claimed that the assessee has utilized these premises for business for which the assessee has claimed depreciation for the furniture and fixture and computers installed at the above-stated four premises. The authorities below have rejected the contentions of the assessee and claim of the assessee for grant of depreciation on furniture and fixtures and co .....

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bstantiate his claim that these premises were in-fact used by him for his business. We have observed that the A.O. is insisting on the commercial electricity use as evidence for allowing the claim of the business user of the premises of the assessee, which in our view, no-doubt is a vital document/evidence to claim that the premises are used for commercial / business purposes but it is not the only/sole evidence to prove that the afore-stated premises are used by the assessee for the purposes of .....

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tted by the assessee before deciding the matter on merit.Needless to say that proper and adequate opportunity of hearing in accordance with law shall be granted to the assessee by the AO before deciding the issue on merits in denovo proceedings. We order accordingly. 24. Ground No. 4 relates to the action of the A.O. in treating three properties namely Evershine Greens , Saidwar and Tranquil Treat as deemed to be let out properties. The assessee was asked as to why these three properties other t .....

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assessee has earned rental income of ₹ 60, 000/ - during the year which has been duly offered for tax. (b) EVERSHINE GREENS:- This property is being used by the assessee as office premises for himself for his creative activities as an Actor, Director etc. for conducting story sessions, photo shoots, rehearsals etc. (c) TRANQUIL TREAT :-This property is also being used as godown and storage space for various materials, costumes, scripts other film and theatre stage related material. (d) RA .....

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eemed let out properties while working of income of these house properties under the head Income from house property which was calculated as under:- Saidwar - 32,41,630 Evershine Greens - 44,59,690 Tranquil Treat - 9,00,000 Total - 86,01,320 10% of the book value of the property 8,60,132 Less: 30% Standard Deduction 2,58,040 6,02,092 Hence, ₹ 6,02,092/- was treated as income from house property and added to the income of the assessee by the AO vide assessment order dated 07-12- 2010 passed .....

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have given draft computation of income from house property and the rental from residential property generate returns about 3-4% of the amount of purchase of property, therefore rental income computed by taking 10% of book value is not commensurate with amount of investment. Section 23(1)(b) of the Act does not specify any such formula for determination of annual letting value. The assessee relied on the judgment of Hon ble Supreme Court in the case of CIT v. Bharat Ram & Sons, 266 ITR 106 ( .....

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or the assessee submitted that the properties have been used for the personal use of profession and hence it should not be treated as deemed let out properties as Section 22 of the Act clearly laid down that with respect to properties used for the purposes of business or profession, the annual value of such property shall be taken to be NIL for computing under the head Income from House Property . These properties were used for the purpose of business and the same shall not be chargeable to tax .....

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s. We find that the assessee also claimed depreciation on furniture and fixture and computers installed at these properties whereby we have set aside the matter of allowability of depreciation on furniture and fixtures and on computers to the file of A.O. and directed the assessee to produce cogent evidence/material to substantiate his claim of business user of the afore-stated properties and the A.O. shall examine the same for deciding the issue of claim of depreciation and we apply the same pr .....

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n the light of the guidelines laid down by Hon ble Bombay High Court in the case of Tiptop Typography (2014) 48 taxmann.com 191(Bom.HC) in arriving at the ALV of the above properties. Needless to say that the A.O will grant the assessee proper and adequate opportunity of being heard as per law to comply with principles of natural justice in accordance with law. We order accordingly. ITA No. 5601/Mum/2012(revenue appeal). 30. At the outset, the ld. Counsel for the assessee submitted that the tax .....

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Highlight: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017 - Circular

Circular: Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 120A of the Central Goods and Service Tax Rules, 2017

News: Auction for Sale (Re-issue) of Government Stocks

Article: TDS APPLICABILITY ON GOVERNMENT CONTRACTS UNDER GST (Under Section 51 of the CGST Act, 2017)

News: Manmohan takes potshots at note ban, 'hasty' rollout of GST

News: GST on petrol, diesel requires wider discussion: Nitish



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