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TMI Blog2020 (6) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 3. The CIT(A) erred on facts and circumstances of the case by deleting the addition made on account of 'Unexplained Investments' - Increase in Capital amounting to Rs. 28,76,819/- observing that the transaction between the assessee and the company in which he was a director is in the nature of advance for commercial purposes. 4. The CIT(A) erred on facts and circumstances of the case by deleting the addition of Rs. 9,17,000/- made on account of 'Unexplained Cash Credits' - As the cash receipts are in respect of film distribution income of the assessee. " Non-deduction of TDS: 3. The assessee is in the business of film distribution in the name of M/s Sukrit Pictures. 4. The relevant facts are that the assessee has paid an amount of Rs. 2 crores as Minimum Guarantee Royalty (MGR) and has not deducted TDS. The Assessing Officer held that the payment would fall within the definition of "Royalty" and failure to deduct TDS as per Section 194J of the Income Tax Act, 1961 would attract provisions of Section 40(a)(ia) of the Act. The ld. CIT (A) deleted the addition on the grounds that the provisions of Section 194J of the Act cannot be applicable to the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusive another non-inclusive. The inclusive part consists of the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting. The non-inclusive part consists of consideration for the sale distribution or exhibition of cinematographic films. The Assessing Officer misread the provision in the second part of the clause with regard to exhibition of cinematographic films. He wrongly held that what the assessee purchased is copyrights and hence liable to TDS. In fact, the copyrights are always with the producer. The distributor is only given the right exhibition of cinematographic films. Hence, such transactions do not attract the provisions of TDS. Further, the minimum guarantee amount which is paid by the distributor for acquiring the exhibition rights of a movie is a fixed expenditure for the distributor that is paid to producers irrespective of the fact whether the film generates a profit or incurs losses. Hence, the payments made by the assessee do not fall under the term "Royalty" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,35,27,196/-, an amount of Rs. 1,13,21,118/- has been withdrawn. The closing balance reflected is Rs. 22,06,078/-. The ld. CIT (A) has examined the entire account and did not find any discrepancy. Hence, the addition made by the Assessing Officer can be said to be an addition made cursorily without looking into the capital introduced and the profits of the year. Therefore, the addition is hereby directed to be deleted. 13. The Assessing Officer observed that the assessee made cash deposits of Rs. 9,17,000/- in the bank account of Karur Vysya Bank Ltd. and treated the same as unexplained. Before us the ld. DR argued that the assessee could not prove the sources of this cash deposits satisfactorily. We find as per ld. CIT (A), the cash was duly reflected in the cash book and the same has been deposited in the bank account. The ld. CIT (A) held that the assessee has earned an amount of Rs. 2,06,73,705/- which was generated during the course of film distribution business. The ld. CIT (A) has examined the cash book and tallied the same with the sales register. The ld. CIT (A) thereafter deleted the addition since no discrepancy has been found. The factual observation of the ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the income from house property are as under: "23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be - (a) the sum for which the property might reasonably be expected to let from year to year; or (b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or (c) where the property or any part of the property is let60 and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable: Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him. Explanation.- For the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. 18. The Explanation can be invoked if (B) above is applicable. When (B) is invoked, the benefit of explanation is subjected to the rules (Rule 4). 19. Rule 4 reads as under: "4. For the purposes of the Explanation below sub-section (1) of section 23, the amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,- (a) the tenancy is bona fide; (b) the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property; (c) the defaulting tenant is not in occupation of any other property of the assessee; (d) the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.]" 20. We find that the ld. CIT (A) has confirmed the addition owing to failure of the assessee to fulfill the conditions laid down in the Rules. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ool. From the perusal of pages 27 to 31 of Paper Book which is a confirmation from Chief Manager of Karur Vysya Bank dated 07.03.2014, it is seen that transactions of Rs. 39,47,470/- dated 30.03.2011 and of Rs. 24,70,175/- dated 31.03.2011 were in the name of M.S. Education Society and Tyagi Public School. It was also stated that Sh. Yashovardhan Tyagi was the authorized signatory for these accounts. Therefore, it is a fact that deposits of Rs. 39,47,470/- and Rs. 24,70,175/- were made in the accounts of M.S. Education Society and Tyagi Public School which are separate entities. The fact that assessee is an authorized signatory of those accounts does not establish that accounts belonged to the assessed when both these entities are separately assessed. Therefore, the nature and source of deposits amounting to Rs. 39,47,470/- and Rs. 24,70,175/- needs to be examined in the hands of M.S. Education Society and Tyagi Public School respectively but not in the hands of the assessee. Hence, we hereby direct that the addition is liable to be deleted in the hands of the assessee.
25. In the result, the appeal of the revenue is dismissed and the appeal of the assessee is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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