TMI Blog2016 (6) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no dispute that the expenditure was incurred during the relevant previous year. That being the case, assessee is eligible to claim the deduction Disallowance on account of cost of production of feature film - whether provisions of section 194J is applicable to such payments made in kind - Held that:- Since the payment made by the assessee is in kind, the provisions of section 194J are not applicable. Accordingly, allowing assessee’s claim, we delete the addition made by the Assessing Officer. See CIT v/s Chief Accounts Officer, Bruhat Bangalore Mahanagar Palika [2015 (10) TMI 2184 - KARNATAKA HIGH COURT ] Disallowance of advertisement and publicity expenses - Held that:- The expenditure incurred in regular course of business has to be allowed under section 37. The ratio laid down by the co–ordinate bench of the Tribunal is squarely applicable to the facts of the present case. Therefore, expenditure incurred by the assessee being wholly and exclusively laid down for the purpose of assessee’s business is allowable as deduction under section 37 of the Act. Accordingly, allowing assessee’s claim of deduction, we delete the addition made by the Assessing Officer. See D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de out of interest free funds available with the assessee, no disallowance under section 14A can be made out of the interest expenditure. - ITA No. 5271/Mum./2013, ITA No. 1577/Mum./2013 - - - Dated:- 31-5-2016 - Shri Saktijit Dey, Judicial Member And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri Hiru Rai For the Revenue : Shri B.S. Bist ORDER Per Saktijit Dey, J. M. Instant appeals by the assessee are directed against separate orders passed by the learned Commissioner (Appeals) 40, Mumbai, for the assessment year 2009 10 and 2010 11. ITA No. 1577/Mum./2013 A.Y. 2009 10 2. In grounds no.1 and 2, the assessee has challenged disallowance of certification expenses of ₹ 6,59,613 by treating it as capital in nature. 3. Brief facts are, the assessee a company engaged in production of feature films and Television programs. For the assessment year under consideration, assessee filed its return of income on 30th September 2009, declaring loss of ₹ 5,84,57,272. During the assessment proceedings, the Assessing Officer noticed that assessee has debited an amount of ₹ 6,59,613 to the Profit Loss account on account of certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v/s Upper India Steel Mfg. Engg. Co. Ltd. [2014] 227 Taxman 173 (P H); iv) CIT v/s Empire Jute Co. Ltd. [1980] 124 ITR 001 (SC); 6. Learned Departmental Representative relied upon the decisions of the learned Commissioner (Appeals) and the Assessing Officer. 7. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. It is evident from the order of the Departmental Authorities that they have considered the expenditure to be capital in nature because the certificate is valid for three years. However, in our view, that cannot be a ground to treat the expenditure as capital in nature unless it creates an asset of enduring nature. Neither the Assessing Officer nor the learned Commissioner (Appeals) has established on record that by obtaining the certificate, the assessee created any asset of enduring nature. On the other hand, the decisions relied upon by the learned Authorised Representative as referred to above have held that sum paid by the assessee for obtaining ISO certificates are revenue expenditure. Therefore, following the rulings of Hon'ble Karnataka High Court as referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Being aggrieved of such disallowance, assessee challenged the same in an appeal preferred before the learned Commissioner (Appeals) who also confirmed the addition by holding that gift is nothing but professional fees paid to the concerned person, hence, attracts the provisions of section 194J. 10. Learned Authorised Representative reiterating the stand taken before the the Departmental Authorities submitted, instead of making payment in money the assessee has given gifts to the concerned persons towards their services rendered by them in making the films. Drawing a reference to the provisions of section 194J, learned Authorised Representative submitted, it is applicable in case of payment of any sum towards fees for professional services. He submitted, the term any sum , used in section 194J would denote payment in money terms and not in kind. He, therefore, submitted, provisions of section 194J would not be applicable to the facts of the present case as the assessee has not paid any money. In support of such contention, he relied upon the following decisions: i) H.H. Sri Rama Verma v/s CIT [1990] 187 ITR 308 (SC); ii) CIT v/s Hindustan Lever Ltd. [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or also in kind requires to be examined. It is the contention of the assessee that any sum as referred to in section 194J, would only relate to payment made in money term. It is observed, in case of Shri H.H. Sri Rama Verma (supra), the Hon'ble Supreme Court while referring to the expression any sum paid used in section 80G, held that any sum referred to in the provision would only mean cash amount of money. The Hon'ble Karnataka High Court in CIT v/s Hindustan Lever Ltd. (supra), referring to the provisions of section 194B of the Act, held, where the payments are in kind there is no requirement of deduction of tax at source. Further, the Hon'ble Karnataka High Court in CIT v/s Chief Accounts Officer, Bruhat Bangalore Mahanagar Palika, ITA no.94 and 446 of 2015, held as under: 12. The concept of tax deduction at source (TDS) and depositing the same with the Revenue is where payment is made by cash, cheque, demand draft or any other similar mode. When such payment in terms of money is made, the deduction is to be made by the person responsible to pay, and is to deposit the same with the Income Tax Department, which would be adjusted and credited to the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the normal course of his business. 19. Learned Authorised Representative submitted, even if the expenditure incurred towards cost of production may not be allowable under rule 9A, but certainly it has to be allowed under section 37. He submitted, though the expenditure incurred towards advertisement is part of cost of production but definitely it is for the purpose of business, hence, is allowable as business expenditure under section 37 of the Act. In support of such contention, learned Authorised Representative relied upon the following decisions: i) DCIT v/s Dharma Productions Pvt. Ltd. [2014] 62 SOT 177 (Mum. Trib.); and ii) CIT v/s Prasad Productions Pvt. Ltd. [1989] 179 ITR 147 (Mad.) 20. Learned D.R. relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer. 21. We have considered the submissions of the parties and perused the material available on record. As is evident, the Assessing Officer has disallowed the expenditure incurred on advertisement by applying the provisions of rule 9A on the ground that the assessee has incurred such expenditure after certification of film by the Board of Film Censors. The learned Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee, hence, un realisable stock which has no value has to be written off as per the accounting principles. However, it was submitted, the assessee had incurred 7,85,806 as seven abandoned television serial projects which was claimed as revenue expenditure. Further, it was submitted by the assessee that the expenditure of ₹ 11,33,000 was incurred for the film project Robot and the amount was paid to Shri S. Sankar. It was submitted, the film was to be produced by the assessee under his direction but the company decided not to pursue the project. Assessee submitted, out of the total money paid, Shri S. Sankar, did not return ₹ 11,33,000 which was claimed as revenue expenditure. Assessing Officer after considering the submissions of the assessee, did not find merit in the same. He observed, assessee has not brought anything on record to substantiate that the television and film projects were not completed. Accordingly, he disallowed deduction claimed of ₹ 19,19,386. 24. The learned Commissioner (Appeals) also confirmed the disallowance. 25. Learned Authorised Representative submitted, the very fact that the assessee abandoned the projects proves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter verifying the balance sheet for the impugned assessment year noticed that the assessee had made investment in shares amounting to ₹ 12,50,57,300, as on 31st March 2009, and opening balance was ₹ 1,51,57,300. He further noticed that assessee has claimed interest expenditure on loan amounting to ₹ 2,92,80,083. He, therefore, called upon the assessee to explain why disallowance under section 14A r/w rule 8D should not be made as the investment in shares would yield exempt income. In response to the query, it was submitted by the assessee that as no expenditure was incurred for earning tax free income, no disallowance under section 14A can be made. Th Assessing Officer, however, was not convinced with the explanation of the assessee and proceeded to disallow an amount of ₹ 33,91,821 under section 14A r/w rule 8D. The disallowance was also confirmed by the learned Commissioner (Appeals). 30. Learned Authorised Representative submitted, during the relevant previous year, assessee has not earned any exempt income, hence, no disallowance under section 14A r/w rule 8D can be made. Further, it was submitted by him, entire investment of ₹ 11 crore in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince was made out of interest free funds available with the assessee, no disallowance under section 14A can be made out of the interest expenditure. Thus ground no.6, is allowed for statistical purpose. 33. In the result, assessee s appeal for A.Y. 2009 10 is partly allowed. ITA no.5271/Mum./2013 A.Y. 2010 11 34. At the outset, learned Authorised Representative expressed his intention not to press ground no.3 due to smallness of the amount in dispute. Considering such submissions, we dismiss ground no.3, as not pressed . 35. In ground no.1, assessee has challenged disallowance of ₹ 69,88,164, representing the cost of abandoned projects. 36. After hearing both the parties, we find that this issue is similar the issue raised in ground no.5, by the assessee in its appeal being ITA no.1577/Mum./2013, for assessment year 2009 10, wherein, vide Para 26, we have allowed the ground raised by the assessee for the reasons stated therein. Consistent with the view taken by us, this ground being identical, the same is also allowed. 37. In ground no.2, assessee has challenged the disallowance of ₹ 23,34,528 under section 14A r/w rule 8D. 38. Learned Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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