TMI Blog2017 (1) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... city expenses are not allowable as per Rule 9A and 9B of the Rules. It is the say of the Counsel that Rule 9A and 9B do not preclude the assessee to claim such genuine business expenses u/s. 37(1) of the Act. Since only ground for disallowing publicity expense is that such expenses are not allowable as per Rule 9A,9B, we find force in the submission of the Counsel that such expenses can be allowed u/s. 37(1) of the Act. However, since the AO has not considered this aspect as the additions have been made by the Ld. CIT(A) during the appellate proceedings, in the interest of justice and fair play, we restore this issue back to the files of the AO. The AO is directed to verify the claim of publicity expenses vis-avis business of the assessee for the year under consideration. The AO should also verify how much publicity expenses have been recovered by the assessee and credited to its Profit and loss account for the year under consideration. The assessee is directed to furnish necessary details to substantiate its claim of publicity expenses. - Decided in favour of assessee for statistical purposes. Disallowance made under Rule 9A/9B of the Rules - expenditure incurred by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement show that the licencee i.e. SET Satellite Singapore Ltd. acquired rights to exhibit the movies 24 times during the licence period and since the licence period is for four years the SET Satellite could exhibit the movies not more than six times in each year which means that the transferee has 25% right of exhibiting the moves in each year which further means that the right only for 25% of the licence fee has accrued to the assessee in the first year. Therefore, the plea of the AO that the entire income has accrued to the assessee as soon as the agreements have been executed is not correct. The licence fee did not accrue to the assessee as per terms of the agreement. The taxability of the licence fee has to be decided on the provisions of the contract. As per the agreement the transferee has only the right to exhibit the films over a period of four years as the agreement is that of a lease the assessee has rightly and correctly spread the licence fee over a period of four years. The reliance placed by Ld. DR of Rule 9A appears to be misplaced as Rule 9A has no relation with the method of accounting as it nowhere deals with section 145 of the Act. Considering the entire fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had rightly restricted the expenditure to ₹ 3.14crores. But, there was no justification in not allowing the remaining amount of ₹ 1.10 crores once the assessee had produced the necessary evidences. We are of the opinion that there is no infirmity in the order of the FAA. So, upholding his order, we dismiss third ground. Additions made under the head unaccounted receipts - Held that:- We find that assessee had distributed a regional film, that after deducting publicity cost it paid the balance amount to the producer of the film, that it did not prove the transaction through its books of accounts, that the payment was made through banking channel, that the recipient producer had admitted to have received the disputed amount and had shown in his return of income. Considering these facts and discussion held in earlier paragraphs, we are of the opinion that the AO was not justified in treating the income as concealed income. Depreciation on bungalow - Held that:- The FAA after considering the old records and the order of the Tribunal had given a finding of fact that the premises was being used as office premises in the year. Nothing adverse to the said fact was brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance of expenses on credit cards - Held that:- We find that similar issue has been decided in favour of the assessee by the order of the Tribunal for the earlier year. We also agree with the argument raised by the assessee that in case of a private Ltd company, there cannot be any personal expenses. Considering the above, we uphold the orders of the FAA - I.T.A./2597/Mum/2012, I.T.A./3345/Mum/2012 - - - Dated:- 20-1-2017 - Sh.Rajendra,Accountant Member and Amarjit Singh,Judicial Member For The Revenue : Ms. Vidisha Kalra -DR For The Assessee :Shri Porus Kaka-AR PER Rajendra A.M. - Challenging the order dtd.29.02.2012 of the CIT(A)-40,Mumbai, the Assessing Officer (AO)and the assessee have filed cross appeals for the year under consideration. Assessee-company, engaged in production and distribution of feature films, filed its return of income on 30.10. 2007, declaring income of ₹ 62.36 crores. The AO completed the assessment u/s.143(3)of the Act on 30.12.2009, determining its income at ₹ 1,21,08,16,089/- During the course of hearing before us, the Authorised Representative(AR)stated that assessee did not want to press Grounds no.10and 12(consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that the amount in question was shown as creditors in the AY.2006- 07. The AO held that that same should have been clubbed under the head sundry creditors and not as unsecured loans, that it had failed to substantiate the introduction of ₹ 3.14 crores in its books of account by producing supporting evidences, that the amount had to be treated as unexplained cash credit within the meaning of section 68 of Act. 3.1. A ggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him, it was argued that the amount of ₹ 3.13 crores shown as liability as the business statements/accounts between both the parties could not be settled during the year, that the amount paid by KE towards publicity was due to it, that the minimum guarantee was also kept pending since the picture was a huge flop, that there was dispute between parties regarding certain issue that the amount was shown as liability receivable as on 31.3.2006 and 31.3.2007, that in the subsequent year the account were settled after making payment of ₹ 13 lakhs, that the balance amount of ₹ 3.01 crores was offered for taxation after settlement of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing before us, the Authorised Representative (AR) stated that accounts with KE could not be settled due to litigation, that in the next AY.settlement took place, that the assessee had voluntarily offered income in the subsequent year, that it was a liability and it could not be treated as cash credit. He referred to page no.143, 147 and 148 of the PB and relied upon the cases of Shah Construction Co. Ltd. (237 ITR814)and P. Mariappa Gounder (232 ITR 2). The Departmental Representative (DR)argued that the assessee was not maintaining the books of accounts properly, it was maintaining three divisions namely production, distribution and home entertainment division, that even for audit purpose books were not properly maintained and not produced before the auditors, that in the books of account no liability was shown regarding the disputed amount on the closing date of year in the name of KE, that it had not produced any evidence before the AO/FAA about the dispute, that there was no justification for not showing the income during the year for consideration. Referring to page 147 of PB, he stated that it was a general entry and not the opening balance for the year. 3.3. W e have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. State losses interest, if payment of taxes is postponed. It is also a fact that the assessee is following mercantile system of accounting and as per that system it had to show the accrued income in the year of accrual. We have taken note of the fact that assessee not a small time taxpayer of a muffosil place. It is one of the leading production house of movies and is assisted by professional. Therefore, we are unable to accept that due to error of some low level employee proper entries were not made in the books of accounts. 3.3.2. H ere, we would also like to refer to the cases relied upon by the assessee. In the case of P. Mariappa Gounder (supra) the Hon ble Apex Court has dealt the issue of mense profits and crystallization of right to receive the money. In our opinion, facts of both the cases are totally different. In the matter of Shah Construction(supra), the Hon ble Bombay High Court has deliberated upon entirely different issue. In that matter, the assessee had taken up some contract works in the Middle East countries. Against such contracts, advances were received by the assessee which had to be adjusted against the running bills submitted by the assessee from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty were covered within meaning of Rule 9A of the Rules. He made an addition of ₹ 1.62 Crores. 4.1. A ggrieved by the order of the AO, the assessee preferred an order before the FAA. Before him, it was argued that terminology, post production expenses used in production of film was nothing else but production expenses and that it did not include print cost or marketing cost, that it covered expenses incurred on dubbing background sound, censor certification expenses, that such expenses were nothing but cost of completing the movie, that the expenditure was allowable u/s.37 of the Act, that all the advertisement and publicity was done before censor certification date. A reference was made to the copies of the bill and copy of the censor certificate to claim that the expenditure to the tune of ₹ 1.28 crore was allowable as per Rule 9A of the Rules. The FAA called for a remand report from AO in that regard. As per the FAA the AO did not comment upon the issue raised by the assessee. It was further argued that AO had wrongly interpreted Rule 9A of the Rules, that the impugned expenditure was normal business expenditure deductible under 37 of the Act. The assessee relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs on the ground that such publicity expenses are not allowable as per Rule 9A and 9B of the Rules. It is the say of the Counsel that Rule 9A and 9B do not preclude the assessee to claim such genuine business expenses u/s. 37(1) of the Act. Since only ground for disallowing publicity expense is that such expenses are not allowable as per Rule 9A,9B, we find force in the submission of the Counsel that such expenses can be allowed u/s. 37(1) of the Act. However, since the AO has not considered this aspect as the additions have been made by the Ld. CIT(A) during the appellate proceedings, in the interest of justice and fair play, we restore this issue back to the files of the AO. The AO is directed to verify the claim of publicity expenses vis-avis business of the assessee for the year under consideration. The AO should also verify how much publicity expenses have been recovered by the assessee and credited to its Profit and loss account for the year under consideration. The assessee is directed to furnish necessary details to substantiate its claim of publicity expenses. Ground No. 15 is allowed for statistical purposes. Considering the above, we decide second ground of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation each AY.had to be dealt separately, that expenses of a particular year have to be claimed and allowed in that very year, that the services were rendered by Adlab in the prior period, that quantification of payment was not subject matter of dispute, that the AO was justified in not allowing the prior period expenses. 5.2. T he AR contended, before us, that the assessee was having a running account with Adlab , that bills from Adlab were regularly settled, that the amount in question was the additional cost paid for prints of the movies released in earlier years, that the amount was paid during the year and liability was finally settled, that the assessee had offered the income in earlier years, that the expenditure incurred for such income had to be allowed. He further stated that even if the matter was to be restored back to the file of AO he should be directed to find out as to whether the income arising out of the prints was offered for taxation in the earlier years or not. The DR left the issue to the discretion of the Bench. 5.3. W e find that the addition was made with regard to the expenditure incurred by the assessee for getting the prints of old movies. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal for 2006-07. Following the order of his predecessor, he decided the issue against the assessee. 6.3. W e find that the Tribunal in its order for the AY.2006-07 had decided the identical issue in favour of the assessee. While deciding the GOA-2 we have reproduced the relevant portion of the that order. Respectfully, following the order for the earlier year, of the Tribunal, we decide fourth ground in favour of the assessee. 7. D isallowance of publicity cost incurred, is the subject matter of Ground No.5. During the assessment proceedings, the AO observed that film Ab to Banja Sajanwa Hamar was distribu - ted by the assessee during the period relevant to AY.2007-08, that the assessee had admitted that the amount of ₹ 9.40 lakhs was not reflected in the books of accounts. He added the amount in question to the total income of the assessee under the head concealed income. 7.1. B efore the FAA, during the appellate proceedings, the assessee argued that receipts collected by it on behalf of the producer of the film Ab to Banja Sajanwa Hamar were paid to the party after deleting the publicity expenses incurred in their account towards the said movie. Copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts, that the payment was made through banking channel, that the recipient producer had admitted to have received the disputed amount and had shown in his return of income. Considering these facts, we are of the opinion that FAA was not justified in partly upholding the disallowance made by the AO. When the assessee had not claimed any deduction, there was no justification for making any disallowance. Ground no.5 is decided in favour of the assessee. 8. N ext Ground(GOA6-8)is about remuneration paid to the directors amounting to ₹ 7.07 crores. During the assessment proceedings the AO found that the assessee had paid ₹ 9.04 crores to its directors as professional fee. He required it to explain as to why the professional fee paid by it to the directors should not be treated as salary within the meaning of section 17 of the Act. Vide its letter, dt.7.12.2009, the assessee filed its explanation. After considering the same, he held that there was no force in the argument of the company that the directors had supervised the overall work of the assessee carried out during the period relevant to AY. 2007-08, that professional fee of ₹ 9.50 crores had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses by way of payment made to the directors into all films for which the work was done during the year, that the AO had observed that the expenses had to be capitalised in work in progress, that the treatment given by the AO would mean that same would stand allowed in the respective years, that there was no reason to believe that the AO would refrain from doing so. Accordingly, the FAA dismissed the ground, raised by the assessee. 8.2. G round seven is about allowing the proportionate disallowance on account of directors fees disallowed in last year for the films released during the current year. 8.3. I n ground number eight the assessee has raised the issue of disallowance of ₹ 50 lakhs paid to one of the directors,Pamela Chopra (PC). During the assessment proceedings, the AO observed that the assessee had failed to produce any documentary evidence which could show that PC had ever attended the office of the assessee, that it was not able to describe the work attended by her, that it further failed to furnish details of qualification experience and skill in lyrics and song except a copy of International Movie Data, that the IMD showed her as a playback singer in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating the appeal for the AY.2006-07(supra). We would like to reproduce the relevant portion of the order of the Tribunal and it reads as under: 17. Ground No. 3 relates to the disallowance of Director s remuneration to the tune of ₹ 2.30 crores. The assessee has further agitated the action of the Ld. CIT(A) who enhanced the disallowance without giving the notice u/s. 251(2) of the Act. 18. During the course of the assessment proceedings, the AO noticed that the company has debited a sum of ₹ 85,00,000/- each as Director s remuneration in respect of three movies released during the year. The AO sought explanation from the assessee to justify the payment of ₹ 85,00,000/- each as Director s remuneration in respect of three movies released during the year. The assessee filed a detailed reply dt. 24.12.2008 and submitted that Shri Aditya Chopra was paid 2 crores as producers fees for all the three movies and Mrs. Payal Chopra was paid ₹ 30 lakhs as managerial remuneration for three movies. It was explained by the assessee that the amount is paid to the Directors for the overall input made by them throughout the year for the work done by them. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wadeshi Cotton Mills Vs CIT 63 ITR 57. Decision of Madras High Court in the case of Mycol (Private) Ltd. Vs CIT 150 ITR 609. The Ld. CIT(A) finally concluded that remuneration paid to the directors are not wholly and exclusively for the production of three movies released during the year as the assessee could not establish the nexus between the specific services rendered by the directors and the production of the three movies and went on to disallow the entire directors remuneration to the tune of ₹ 2.30 crores in place of the disallowance of ₹ 92 lakhs made by the AO. 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(A) has made enhancement to the disallowance made by the AO without affording any opportunity to the assessee. We may cancel the addition at this stage only. However on merits, we find that the Revenue authorities have not appreciated the facts and the circumstances involved in making of movie. It is the say of the Revenue authorities that the assessee could not bring any evidence to show what extra services have been put by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights of the movies on television in respect of the movies Dhoom-2 and Kabul Express for a total consideration of ₹ 18 crores, that according to the terms and conditions of the agreement the assessee was to receive ₹ 3 crores on the date of execution of the agreement, that it did not offer same for taxation. The AO was of the opinion that balance amount of ₹ 15 crores also became the income of the assessee for the year under consideration on accrual basis as the assessee was following Mercantile system of accounting, that it had received the income on the very day on which the agreement was executed. The assessee made elaborate submissions before the AO in that regard. However, not satisfied with the explanation, he made an addition of ₹ 18 crores to the income of the assessee for the year under appeal. 9.1. B efore the FAA, the assessee argued that the AO did not consider that the rights were for four years and the total receipts could not be considered as receipt of the current year, that the AO erred in not allowing the deduction of ₹ 9 crores that was disallowed in earlier year, that the effective period of telecast right, as per the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aggregate agreement value of which amounted to ₹ 50,00,00,000/-. The AO further observed that as against the agreement value of ₹ 50 crores, the assessee has shown only ₹ 40,59,99,713/- as SET satellite income receipt during the year. The AO sought explanation from the assessee why it has not included ₹ 9,40,00,287/- in its total income. The assessee filed a detailed reply vide letter dt. 24.12.2008. The assessee submitted that all the agreements made for satellite rights are for 4 to 5 years and in support of its claim, the assessee filed copies of each agreement. The amount offered movie wise is exhibited at page-3 of the assessment order. In support of its claim, the assessee also relied upon the decision of ITAT Cochin Bench in the case of Molly Boban Vs ITO IN ITA No. 01/Coch/2007 decided on 11.3.2008 wherein the Tribunal has held that the consideration of ₹ 4 lacs relating to transfer/sale of rights in pictures for a period of 5 years had to be assessed in 5 years and not in the year under appeal alone. 3.1. The AO rejected the submission of the assessee on the ground that the assessee is following mercantile system of accounting and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrue to the assessee as per terms of the agreement. The taxability of the licence fee has to be decided on the provisions of the contract. As per the agreement the transferee has only the right to exhibit the films over a period of four years as the agreement is that of a lease the assessee has rightly and correctly spread the licence fee over a period of four years. The reliance placed by Ld. DR of Rule 9A appears to be misplaced as Rule 9A has no relation with the method of accounting as it nowhere deals with section 145 of the Act. Considering the entire facts in the light of the SET Satellite agreement, in our considerate view, the addition of ₹ 9,40,00,287/- deserves to be deleted. The AO is directed to delete the addition. Ground No.1 is accordingly allowed. Respectfully following the above, we decide the issue in favour of the assessee. 10. N ext ground is about disallowance on marketing cost and other cost under rule 9B of the Rules for movies Krish and KANK. Vide his letter, dtd. 24/11/2009, the AO required the assessee to explain the cost of production as per impounded books of accounts with reference to the audited statement. He observed that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd had worked as a producer, that the distribution division would work only as distributor and that too for Bombay territory, that the production division worked for all territories except Bombay territory, that the measure payments were to both the producers for acquiring the film rights, that question of disallowance under rule 9B would not arise, that out of the total expenditure of ₹ 6.80 crores ₹ 4.90 crores was payment to the producers, that the AO had erred in mixing the figures production division and the distribution division while passing the order, that ₹ 4.90 crores were paid from production division for acquiring the rights of movies from the producer, that as per Rule 9B the cost of acquisition had to be allowed to an expenditure even if the interpretation of the AO was accepted, that the minimum guarantee of ₹ 3 crores paid by dissolution division was for Bombay territory, that ₹ 4.90 crores paid by cheque was for the territory other than Bombay. The FAA, after considering the available material, held that the whole confusion had arisen because the amount paid of ₹ 3 crores and ₹ 4.9 crores were considered as overlapping, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Ground No. 15 is allowed for statistical purposes. We further find that in the case of Dharma Productions (P). Ltd. (62SOT177), similar issue was deliberated upon extensively and was decided as under: 26. We have considered the rival submissions as well as relevant material on record. There is no dispute about the date of release of the film in question on 29.4.2005. We further note that the Censor Board of Films issued the certification of the film on 21.4.2005 therefore, the film was released for exhibition on commercial basis at the beginning of the previous year and as per Rule 9A of the Income-tax Rule the entire cost of production is allowable deduction. The CIT(A) has enhanced the disallowance by invoking Rule 9A in respect of the amount of ₹ 41,43,240/- on account of positive films and a sum of ₹ 2, 26,30,328/- on account of advertisement and publicity. The reason for disallowance by the CIT(A) is that the advertisement/publicity expenditure is not part of the cost of production therefore, is not allowable as per Rule 9A. The decision relied upon by the CIT(A) are only in respect of the disallowance of expenditure under Rule 9A or 9B whereas the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses and also an item of expenditure in relation to the business of production and exhibition of feature films and would, therefore, qualify for deduction as expenditure laid out or expended wholly and exclusively for the purpose of the business. We have not been referred to any provision in the Act or the rules disallowing such expenditure as an item of business expenditure for the purpose of section 37 of the Act. Though learned counsel for the Revenue placed considerable reliance upon the decision in CIT v. Carborundum Universal Ltd. [1977] 110 ITR 621(Mad), we are of the view that that decision does not in any manner assist the Revenue. In that case, the assessee claimed deduction of a certain amount in the computation of its profits and gains of the business by way of contribution to the superannuation fund of its foreign collaborators and that claim was disallowed by the authorities below. However, the Tribunal held that though that amount was not an allowable deduction under section 36(1)(iv) of the Act as the contribution was not to a recognised provident fund or to an approved superannuation fund nor could be allowed under section 37 of the Act, the payment was allowable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these situations and all types of expenses, hence the proposition that it overrides the provisions of the Act on the face of it, is not valid. 21. Rule 9A is an outcome of exercise of power given to the Central Board of Direct Taxes under section 295(1) of the Income-tax Act, 1961. Thus it is a piece of delegated legislation and must function within the parameters fixed by Legislature by laying down the law, the policy and the standard which Legislature wants to maintain in the application and enforcement of the legislative enactment and be consistent therewith. It, therefore, follows that an ancillary channel, at any rate, cannot neither abridge rights or privileges granted by the statute itself nor confer any special benefits, rights or privileges beyond the provisions of the Act or in contradiction to the provisions of the legislative enactment because the object subordinate legislation is to carry out the statutory provisions effectively and not to neutralize or contradict them. If delegated legislation results into any such situations that would amount to legislation itself and which cannot be abdicated by the Legislature. In this view of the matter, it is not within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the above two orders of the Tribunal, we decide ground no.13 if favour of the assessee. 11. N ext ground deals with ad hoc disallowance of 20% on junior artists/technicians/dress, costume, make-up, dubbing, sound recording, mixing, music recording, dance expenses etc. 11.1. W e find that identical issue was decided by the Tribunal in its order dated 05.04.2013 (supra)in following manner: 23. Ground No. 4,5,6, 7 8 relate to the adhoc disallowances made by the AO on account of expenses claim under the head Junior Artist/Dress costumes and make up/Dubbing, song recording and mixing /setting expenses and editing music recording and dance expenses. 24. During the course of the assessment proceedings, the AO observed that the assessee has not maintained proper records in respect of call sheet and continuity report and rehearsal book, therefore expenses incurred under the aforementioned heads could not be fully allowed merely on the basis of internal vouchers. The AO went on to disallow 20% of the expenses claimed under the aforementioned heads as under: 1. Expenses in respect of payment to junior artists-Rs. 7,04,231/- disallowed out of ₹ 35,21,159/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee. On the contrary, it should support the case of the assessee that it has made payments to M/s. Pappu Co., which in its turn has not shown its return of income as the entire payment to Junior artists is through Junior Artists Association as formed by M/s. Pappu Co. In our humble opinion, no disallowance can be made on this account. We accordingly direct the AO to delete the additions made on account of payment to junior artists. 29. So far as other adhoc disallowances mare concerned, in the absence of proper records, in our considerate view, a disallowance of 5% of the expenses claimed under these heads of expenses would meet the ends of justice. Therefore, reversing the findings of the Ld. CIT(A), we direct the AO to restrict the disallowances under the head dresses, costumes, make up expenses, dubbing and mixing expenses, setting expenses, editing, music recording and dance expenses to 5% only. Ground No. 4 to 8 are therefore partly allowed. Respectfully, following the above, we delete the addition made on account of payment made to junior artists and we restrict the disallowance to 5% for other expenses. Last Ground of appeal is decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts credited to the distribution division. After obtaining explanation about the disputed amounts, the AO made an addition of ₹ 9.95 crores to the total income of the assessee. 12.1. A ggrieved by the order of the AO, the assessee preferred an appeal before the FAA. Before him, it was argued that the amount in question was merely a receipt transfer between two divisions, that it was collected by distribution office and was partly transfer to the HO, that whenever the DD would receive money from the customer it would book the whole receipt and work out the night income in its books, that based on the gross collection it would transfer and appropriate amount to the HO, that the HO would show the amount in the particular movies account for the timing for the MIS purposes, that at the end of the movie it would be transferred to the distributor division s ledger account, that without appreciating the accounting system of the assessee the AO had added the amount in question under the head unaccounted sales. The assessee produced the copies of ledger accounts of both the divisions and copy of the summary of income from films Krish and Kank. 12.2. A fter considering the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese films was more than the income shown by the assessee in its regular books of accounts. In our opinion, the FAA had rightly observed that the AO had wrongly interpreted the transfer of funds from one division to another as profit of the company. Therefore, we hold that the order of the FAA does not suffer from any legal or factual infirmity. Confirming the same, we decide the first ground of appeal against the AO. 12.5 . Second ground is extension of first ground and is general in nature. We are not adjudicating the same. 13. T hird ground deals with addition made on account of print cost. During the assessment proceedings, the AO observed that the cost of print in respect of movie Dhoom-2 was shown at ₹ 4.28 crores against the expenses of ₹ 4.24 crores, that as per the details filed by the assessee it had credited the aggregate amount of ₹ 3.14 crores as the cost of print recovered, that the difference between the two amounts i.e. ₹ 1.10 crores (Rs. 4.24 crores (-) ₹ 3.14 crores) had to be added to the income of the assessee. 13.1. D uring the appellate proceedings before the FAA, the assessee argued that the AO had made the addition un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dversely comment about the authenticity of the evidences. The expenditure incurred by the assessee is a legitimate business expenditure and is allowable as per the provisions of the Act. As the assessee had failed, at the time of assessment, to fully support the claim made by it, so, the AO had rightly restricted the expenditure to ₹ 3.14crores. But, there was no justification in not allowing the remaining amount of ₹ 1.10 crores once the assessee had produced the necessary evidences. We are of the opinion that there is no infirmity in the order of the FAA. So, upholding his order, we dismiss third ground. 14. F ourth ground pertains to additions made under the head unaccounted receipts, amounting to ₹ 9.40lakhs. While deciding the ground no.5, filed by the assessee(paragraph 7-7.3)we have dealt the issue at length. The AO has challenged the order of the FAA, as he had given part relief. 14.1. W e find that assessee had distributed a regional film, that after deducting publicity cost it paid the balance amount to the producer of the film, that it did not prove the transaction through its books of accounts, that the payment was made through banking channel, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, that for the period under consideration the assessee was to be allowed depreciation. 16.2. T he DR argued that there were change in facts as compared to last year, that the property was under repair, it was no longer an office even before renovation. The AR stated that survey was carried out in 2010, that the AO had allowed depreciation while completing assessment for AY.2009-10, u/s.143(3), that in the AY 2010-11 it was shown as residence of one of the directors. He referred to pg-23 of the PB. 16.3. W e have heard the rival submissions and perused the material before us. We find that the survey was carried out during the AY.2010-11, that the assessee had claimed depreciation for the AY.under appeal, that on the basis of renovation work carried out in the year 2010 the issue of allowability of depreciation for earlier year should not have been decided. The AO had to consider the facts of the year under consideration. The FAA after considering the old records and the order of the Tribunal had given a finding of fact that the premises was being used as office premises in the year. Nothing adverse to the said fact was brought on record by the department. Therefore, in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .16 lakhs. During the assessment proceedings, the AO held that assessee had made certain cash payments in excess of ₹ 20,000/- on particular dates. After considering the submission of the assessee, the AO disallowed 1/5th of the total expenditure i.e. ₹ 46,16,540/- and made an addition of ₹ 9,23,308/-to its total income. 18.1. B efore the FAA, the assessee stated that addition was made under a wrong impression by the AO that each item referred to a single cash payment, that none of the payment to a single person was more than ₹ 20,000, that the payments were only made an entry in the main book from each movie account, that each payment was less than ₹ 20,000/-for which all supporting documents were produced before the AO, that the unit going on an outdoor shoot prepared the excel sheet of each and every voucher of the expenditure, that all the vouchers for a particular day or week were consolidated and a single entry was passed in the accounting software, that the amount reflected in tally was for more than ₹ 20,000/-, that each voucher was less than ₹ 20, 000/-. 18.2. T he FAA verified the vouchers and cashbook produced by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that the amount was reflected in the main account of Yash Raj films Private Limited, that it was just a mirror entry in the main book from Fanna account. After considering the available material, the FAA held that the argument of the assessee was based on books of accounts, that the company was maintaining production account of each movie, that same was margin the main account once the movie was released for the year was completed, that the addition was result of strong understanding of the book entries. He deleted the addition made by the AO. 19.2. T he DR left the issue to the discretion of the Bench. The AR supported the order of the FAA. We find that the assessee was maintaining its books of accounts regularly and was following a peculiar system, that after completion of the movie the account of each movie was merged in the main account. The AO without understanding the system followed by the assessee had invoked the provisions of section 69C of the Act. In the circumstances we hold that the order of the FAA does not suffer from any legal infirmity. Ground number nine is dismissed. 20 . Fluctuation of foreign currency loss is the subject matter of ground no.10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e . The AR contended that loss on account of fluctuation was allowable, that the cost pertained to the year under consideration, even if it was work in progress it could not be treated as a capital expenditure. 20.3. W e have heard the rival submissions and perused the material. We find that the FAA has given a categorical finding of fact that the foreign exchange fluctuation loss related to expired contracts. Nothing was brought over notice to prove otherwise. Therefore, we see no need to interfere with the order of the FAA because he has followed the provisions of rule 115 of the rules and the mandate of AS-11. Confirming his order, we dismiss GOA 10. 21 . Next ground is about disallowance u/s.40(a)(i)of the Act. During the assessment proceedings the AO found that assessee had made payments to certain parties without deducting tax at source. He directed the assessee to file explanation about such payments. He held that impounded books of accounts revealed that expenses were incurred towards the processing and printing charges, that the provisions of section 194C were applicable with regard to the assessing charges/print processing charges, that the assessee did not produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure about the decision taken by him that he had mentioned the word it appears while deciding the appeal, that he had allowed the benefit to the assessee even though he was not sure about the facts. The AR relied upon the order of the FAA. 21.3. W e find that the FAA had partly allowed the appeal of the assessee, that it had directed the AO to make verification about the rates of deducting tax at source and to allow the expenses only after verification. In our opinion, the order of the FAA does not suffer from any infirmity. Confirming the same, we dismiss the ground raised by the AO. 22. L ast ground deals with disallowance of expenses on credit cards. During the assessment proceedings, the AO found that assessee had made payment to Reliance Energy Ltd in respect of bungalow of Y.R. Chopra, entertainment expenses, fees/subscription, insurance expenses, office expenses towards furniture gifts food and refreshments by using credit cards. He observed that assessee had failed to substantiate that the expenses were incurred for carrying on the business activity, that it failed to produce any evidence which could show that expenses were not incurred for entertaining the membe ..... 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