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2016 (4) TMI 568 - ITAT CHENNAI

2016 (4) TMI 568 - ITAT CHENNAI - TMI - Addition made towards the professional receipts - Held that:- The amounts received by the assessee from various producers towards advances cannot be assessed as income of the assessee. Therefore, we set aside the orders of the lower authorities and delete the additions in respect of the advances treated as income of the assessee - Decided against revenue

Addition made on interest on OD as personal expenditure in nature - CIT(A) observed that whe .....

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ny material brought by the AO, we are not in a position to uphold his order. Accordingly, we do not interfere with the order of the Ld.CIT(A) and the same is confirmed.- Decided against revenue - I.T.A.No.1739/Mds. /2013 - Dated:- 11-3-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND Shri Duvvuru RL Reddy, JUDICIAL MEMBER For The Appellant : Mr.M.M..Bhusari,CIT,D.R For The Respondent : Mr.A.S.Sriraman,Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal is filed by the Revenue is .....

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taken a credit of the TDS certificate in respect of this income. Further corresponding income has not offered and the same has offered to tax in the assessment year 2010-11, and the AO going through the TDS, he brought the entire amount for taxation in assessment year 2008-09. On appeal, the Ld.CIT(A) deleted the addition on the reason that the amount was subject to tax for assessment year 2010-11. It was only an advance received in assessment year 2008-09. Against this the Revenue was in appeal .....

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-05 to 2006-07 on 30.12.2011 and while completing assessments, the Assessing Officer assessed various amounts received by the assessee as advances from producers. On going through the assessment orders, we find that no incriminating materials were found so as to bring these amounts to tax in search assessments. We also find that similar advances were brought to tax while completing assessments under section 143(3) of the Act for all these three assessment years by the Assessing Officer and when .....

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therefore, he was of the view that unless written agreements are produced, orders cannot be followed and he tried to distinguish the orders passed by the Tribunal. Authorized Representative for the assessee referring to page 18 of the paper book, which is para 5 of the coordinate Bench of this Tribunal order for the assessment years 2004-05 and 2005-06, brought to our attention wherein there is a specific finding by the co-ordinate Bench stating that no written agreement between the assessee and .....

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ances received by the assessee cannot be assessed as income of the assessee during these assessment years observed as under:- 5. After considering the rival contentions and the materials on record, we find that the advances were received by the assessee for taking up the assignment of acting in the films in future. There is no written agreement between the assessee and the producers of the films. The assessee has shown these advances as liability in the balance sheets and in view of the peculiar .....

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in formalities in future. Therefore, the Hon ble High Court has held that the amounts would be income of the assessee in the year in which the said amounts were received on completion of the conditions as per the agreement and cannot be said as accrued at the time of execution of agreement. In our view, the facts of the case in hand are distinguishable and the decision of the Hon ble jurisdictional High Court relied upon by the CIT(A) is not directly applicable because in the present case there .....

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any other assignment prior to finalizing the proposed assignment? It is also important to note that on accepting the amounts, the assignments itself is not finalized but the finalization of the assignment is also dependant on acceptance of the terms and conditions mutually by both the parties. When the assessee has returned these amounts in the subsequent years as the proposed assignment were not materialized then it would not be proper and appropriate to treat these amounts as income of the as .....

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e is treated as income for which he rendered service to the giver of the advance and the balance was shown as credit in the accounts. So when once the said advance is shown as credit the same cannot be treated as income of the assessee under any stretch of imagination. It is not the case of the Revenue that the said advance givers were examined and that service was rendered by the assessee to them during the period. Therefore, in our considered opinion and in the light of the Supreme Court decis .....

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missions. We may refer to the charging section 4 of the Act to the effect that income tax shall be charged for any assessment year (It the rate or rates provided in any Central Acts in respect of the total income of the previous year of every person. Section 5 deals with the "scope of total income", which is defined in respect of any previous year in terms of accrual, deemed accrual, receipt and deemed receipt, etc. Section 145 deals with the method of accounting in respect of "pr .....

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d. However, what is to be taxed is income and receipt of an amount is not be the basis for the levy of the tax. In the case of Messrs. Shoorji Vallabhdas and Company [1962] 46 ITR 144, the Hon'ble Supreme Court pointed out that the Income Tax Act takes into account two points of time on which the liability to tax is attracted namely - (i) accrual of income or (ii) receipt of income. It is further mentioned that the substance of the matter is "income". It may be emphasized that it i .....

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r the cash system of accounting. The correct position would be that the entire income received, whether arrear or advance of income has to be shown as income under the cash system of accounting. Coming to the facts of this case, the assessee received certain amounts for services to be performed over a period of time, The amount relatable to the services rendered in the year under consideration was shown as income, the reason being that the assessee became entitled to receive that amount from the .....

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efore, this amount did not become the income. Accordingly, we are of the view that the learned Commissioner of Income Tax (Appeals) erred in finding that the assessee was following the hybrid system of accounting on the ground that the whole of the amount received from the clients as retainership fees was not declared as income in the year of receipt of the amount 9. Coming to the issue of consistency of assessments, it may be mentioned that the Hon'ble Supreme Court itself mentioned in the .....

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ubsequent assessment were made on correct appreciation of the principle of the cash system of accounting. Since the assessee succeeds on merits on this aspect, there is no need for us to give a finding that the Assessing Officer was bound in this year to follow the past or future assessment 1/ 8. Since, the facts and circumstances of the case in hand are similar to the case relied upon by the assessee. Therefore, following the decision of this Tribunal as well as the Delhi Benches of this Tribun .....

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rs of lower authorities, qua this issue and delete the addition in this respect. 7. Similarly, the co-ordinate Bench for the assessment year 2006- 07 in ITA No.1329/Mds/2009 by order dated 19.01.2010 held as under:- 7. We have perused the orders of the authorities below and heard the rival contentions. There is no dispute that Ld. CIT(A) had confirmed the advance professional fee of ₹ 55 lakhs as income for the impugned assessment year relying on his own decision in assessee's appeals .....

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the cash system, it was not obliged to consider all sums received by it as income unless such receipt could be categorized as income. Whether it is cash system or mercantile system, a receipt can be treated as income only if such income can be considered as recognized. Just because assessee ad received an amount of advance such sum cannot be treated as income, only for a reasoning that it was following cash system of account. It is on account of this reason that in assessee's own case for e .....

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e impugned assessment year based on his own decision for the earlier years, which was later reversed by the Tribunal. As for the reliance placed by the Ld. Counsel for the Revenue on the decisions of A. Ramki (supra) and D .Meena; the former case was decided relying on the latter decision. If we advert to the decision of D.Meena's case, there the assessee who was also a cine artist, had received advance on the basis of a contract for acting in a film. In other words, there was a subsistent c .....

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aken earlier. Therefore, we find that amount of ₹ 55 lakhs received by the assessee as advance could not have been treated as his income for the impugned assessment year. Such addition stands deleted. Grounds number 2 to 9 of the assessee are allowed. We also find that the co-ordinate Bench has distinguished the decisions relied on by the Departmental Representative in the case of Ms. D.Meena (supra) and the jurisdictional High Court decision in the case of Lakshminarayana Films Vs. CIT (s .....

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oducers towards advances cannot be assessed as income of the assessee. Therefore, we set aside the orders of the lower authorities and delete the additions in respect of the advances treated as income of the assessee. 10. In the result, all these appeals of the assessee are allowed. In view of the decision of the Co-ordinate Bench of the Tribunal cited above, we are inclined to uphold the findings of the CIT(A) and dismiss this ground taken by the Revenue. 5. The second grievance of the Revenue .....

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