TMI Blog2017 (1) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of the expenditure were less than ₹ 20,000/-. So, in our opinion he was justified in restricting the disallowance at ₹ 10 lakhs considering the fact that there were certain expenses that were more than ₹ 20,000/-. Addition u/s.68 - Held that:- No difference with regard to miscellaneous receipts as appearing in the impounded books and regular books. The AO failed to understand the difference in presentation.The FAA has given a categorical finding of fact that,as per the table given above,entire receipt was offered for taxation by the assessee during the year under appeal. In these circumstances,there is no need to interfere with his order. Ground No.3 stands dismissed. Disallowance of expenditure - Held that:- The assessee had actually returned in its FBT return the entertainment expenses so claimed. Therefore, a further disallowance would definitely amount to double addition of the same expense. Further, we find that the AO disallowed the expenses being of personal in nature. The assessee is a private limited company, therefore, there cannot be any personal expense so far as a legal person is concerned, therefore, we do not find any reason in sustaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee, for the AY.2007-08(supra) we have held that the amount in question was to be assessed in that year. There is no need to quote any authority to hold that same income cannot be taxed twice.As the issue of taxability of the income in a particular year has reached finality, so, in our opinion the order of the FAA does not need any interference from our side. - I.T.A./3238/Mum/2014, I.T.A./5596/Mum/2014, I.T.A./14/Mum/2014 - - - Dated:- 25-1-2017 - Sh.Rajendra,Accountant Member and Amarjit Singh,Judicial Member For The Revenue : Ms. Sunita Billa-CIT-DR For The Assessee : Shri Rajesh P. Shah-AR PER Rajendra A.M. - Challenging the orders of the CIT (A)-40,Mumbai the Assessing Officer (AO)and the assessee have filed cross appeals for the AY 2008-09.The AO has filed appeals for AY.s 2005-06 2006-07 also.Assessee-company,engaged in production and distribution of feature films. The details of filing of returns, returned incomes and assessed incomes etc. can be summarised as under : AY. ROI filed on Returned income Assessment date Assessed income CIT(A)order dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntary evidences.Mere stating that expenditure incurred by an assessee is not sufficient to fasten tax liability to that assessee.In the case under consideration, the AO had not explained as to how the expenditure claimed under the head other production expenses was non-genuine.Therefore,we are of the opinion that order,passed by the FAA, needs no interference from our side.Upholding his order,we decide the first Ground of appeal against the AO. 3. Second Ground of appeal (GOA) is about disallowance made u/s.40A(3) of the Act.During the assessment proceedings the AO found that the assessee had made cash payments of ₹ 2.75 crores. He observed that the payments made by it were hit by the provisions of section 40A(3)of the Act,that the assessee had failed to produce the supporting voucher for verification of the disputed expenditure, that the books of account maintained by the assessee were not reliable. Therefore,he made a disallowed 20% of the expenditure,amounting to ₹ 55.04 lakhs. 3.1. Before the FAA the assessee argued that it was maintaining separate cash book for production of each movie,that cash books of all the movies were merged with the main cash book,th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms USA was wrongly credited to Misc. Income. Now rectified and credited to Yashraj Films (USA) DVD Income 87,50,000 Less: Re-imbursement of Travelling Expenses received from Yash raj Films Int Ltd. UK was wrongly to Misc. Income now rectified and reduced from Travelling Exps. 41,19,470 Add: Credit balance written back Distribution division 7,30,549 Add: Commission received from Tarasingh Sons 1,63,951 Add:Misc Receipt of Home Entertainment i.e. income from public performance Synchronisation 23,24,922 Balance as per Financials 39,39,752 He further observed that the AO had ignored the explanation, that he did not make any effort to revert the reconciliation, that the difference between impounded books and regular books was only because of presentation, that the entire miscellaneous report of ₹ 1,31,89,800/- was offered for taxation.Finally,he deleted the addition. 4.2. Before us,the DR stated that matter could be decided on merits. The AR relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3 crores was paid to Yash Chopra for directing one film released during the year,that Aditya Chopra was paid ₹ 3 crores for writing the script of three films,that the usual payment for writing the script of a movie was ₹ 15-20 lakhs, that Payal Chopra was paid ₹ 50 lakhs for costume designing of one film,that Pamela Chopra was paid ₹ 50 lakhs,that she had not rendered any skilled services to the company.He disallowed ₹ 2 crores,Rs.2.40 crores, ₹ 25 lakhs, ₹ 50 lakhs from the remuneration paid to above mentioned four directors. 6.1. During the appellate proceedings the assessee filed detailed explanation with regard to remuneration paid to the directors.The FAA referring to the order of the Tribunal for AY. 2006-07(supra),deleted the addition made by the AO. 6.2. Before us,the DR and the AR relied upon the AO and the FAA respectively.We find that the Tribunal has ,while adjudicating the appeal for subsequent year has decided the issue as under : 22.We have considered the rival submissions and perused the orders of the lower authorities and the material evidence brought on record. It is not in dispute that the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 5% on other payments.Respectfully following the order of the Tribunal we direct the AO to restrict the disallowance to 5% of all expenses other than expenses incurred towards payments made to junior artists.Payment made to junior artists has to be allowed fully.Sixth Ground is decided in favour of the AO in part. 8. Last Ground of appeal (GOA-7) is about deleting the addition of ₹ 11.88 crores on account of proportionate cost of production by applying Rule 9A (5) of the Rules. During the assessment proceedings,the AO disallowed cost of production by applying Rule 9A and made proportionate disallowance of 28.72%,considering the fact that the assessee had not offered for tax satellite fee payable to it.He was of the opinion that as per the provisions of Rule 9A(5) of the Rules proportionate expenses were to be disallowed. Accordingly, he worked out disallowance,after taking into consideration production cost of three movies. 8.1. During the appellate proceedings,the FAA observed that similar issue was dealt by the Tribunal in assessee s own case in the AY.2006-07.Following the same,he allowed the appeal filed by the assessee. 8.2. We would like to reproduce th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not credited the consideration of ₹ 18 crores in the books of account/profit and loss account in respect of the year in which the deduction has been claimed. Thereafter, the Ld. CIT(A) went on to discuss the provisions of Rule 9A(5) and was of the opinion that all revenues from films produced and released during the current year have to be necessarily accounted for during the current year only. The Ld. CIT(A) further observed that the assessee has recognized revenue from three movies, it would be only just and fair to restrict the disallowance proportionate to the receipts not credited to the books of account/profit and loss account for the year. The Ld. CIT(A) thus calculated the total disallowance as exhibited at pages 56 and 57 of his order at ₹ 14.93 crores and ₹ 1.39 crores. 46.The Ld. Counsel for the assessee strongly objected to this findings of the Ld. CIT(A). It is the say of the Counsel that Rule 9A is applicable on the movies which are released prior to 90 days from the close of the accounting year. The Ld. Counsel drew our attention to page 542 of the Paper book which exhibits the cost of production of income for the film released during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the chart exhibited on page-542 of the paper book show that the assessee has shown aggregate income which is much higher than the cost of production of these movies. As the facts are in line with the provisions of Rule 9A(2), the entire cost of production deserve to be allowed. Accordingly, we direct the AO to delete the enhancement made by the Ld. CIT(A) at ₹ 4.93 crores and ₹ 1.39 crores. It would not be out of place to mention that the Ld. CIT(A) has made enhancement keeping in mind issues involved in ground No. 1 of this appeal. As we have allowed ground No. 1, the same will hold good for this ground of appeal also. Ground No. 13 is accordingly allowed. We have dealt the issue in detail while adjudicating the appeal for the AY.2007-08 (ITA/ 2597/Mum/2012,dtd.21.01.2017).Considering the above,we dismiss ground No.7,raised by the AO. ITA/5596/Mum/2014-AY. 2006-07: 9. Solitary ground of appeal raised by the AO deals with deleting the addition of ₹ 1.11 Crores on account of production cost. During the course of survey action,carried out, on 10/9/2009,under section 133A of the Act, certain documents and computer backups were impounde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution were to be merged to see the final picture, that during the assessment proceedings,the assessee had furnished details of production expenses along with the reconciliation statement, that the AO was not able to show as to how service charges expenditure of ₹ 1.1 crores paid from distri -bution division were not allowable.Finally,he deleted the addition. 9.2. During the course of hearing before us,the DR relied upon the order of the AO.The AR stated that identical issue was decided by the FAA in favour of the assessee in earlier years by the FAA. 9.3. We have heard the rival submissions.We find that the assessee had filed a reconciliation statement giving details of payments made by the distribution division,that the AO did not point out any discrepancy in the statement,that while determining the income of the assessee he had clubbed the incomes of all the divisions, that he did not allow clubbing the expenses of the same divisions, that he has not brought on record any proof that disputed amount was part of the inflated expenses,that during the original assessment proceedings he had considered the issue of cost of production and had not made any addition.Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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