TMI Blog2019 (4) TMI 1907X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant : Shri. T. Banusekar, C.A. For the Respondent : Shri. Shaji P. Jacob, Addl. CIT ORDER First two of the above three appeals is of the assessee M/s. Lena Talkies for assessment years 2014-15 and 2015-16, whereas last one is an appeal of the assessee M/s. Vadiganathan Talkies for assessment year 2014-2015. All these appeals assail orders dated 28.09.2018 of ld. CIT(A)-14, Chennai, comprising the disallowance made by the ld. Assessing Officer under Section 40A(3) of the Income Tax Act, 1961 (in short the Act ). Facts being more or less similar, I dispose of these appeals through a common order. 2. Both the assessees are partnership firms having similar partners and they are carrying on the business of screening of feature films. Assesssees had made cash payments for purchase of film rights for exhibiting in their theatres. During the previous year relevant to impugned assessment years, audit reports in Form 3CB filed by the assessees mentioned payments made in violation of Section 40A(3) of the Act. Ld. AO required the assessee to explain why cash payments made for purchasing film rights should not be disallowed under the above Section. Assessees ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer can be verified only after two hours as payments are cleared in batches. The Parties may not be in a position to wait for such time since their requirement will be for immediate rotation of Cash. Some may not have the Internet banking Account to make use of this facilities. Further the NE transactions can be effected only between 8 A.M to 7 P.M on weekdays and 8.00 A.M to l P.M on Saturdays. NEFT and RTGS transfers are not possible 24/7. In common terms business Expediency mentioned in proviso to Section 40A(3) is defined as someone or something that is defined as appropriate for a situation. Business Expediency refers to the transactions that are integral part of the business meant to maintain and nurture the business. There have been various' judgments in favor of Assessees in applying the term business expediency The Assessee have applied their mind to get the distribution rights of film so that the release announced to general public does not fail. This has resulted making Cash Payments but for which the Assessees would have incurred heavy loss by not getting the rights to release these films. The intention of imposing disallowance under Sec 40A(3) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had effected payments to the financers. As per the ld. Authorised Representative, where the time gap between agreement and release of a movie was two days or less, it was not possible to clear the dues through cheque payments. Further, as per the ld. AR, in almost all the cases, where payments were made in cash, the gap between the date of agreement and date of release was not more than two days. Submission of the ld. AR was that the producers to whom assessees had made such payments were established players in the film field. According to him, assessees, if they did not effect cash payments, as insisted by the producers, would not have received the right to release the movies, leaving it high and dry, with no films to run for a week or so. Ld. AR also filed the list of the instances where cash payments were made by the assessees for substantiating his contention that these were done only where the gap between the date of release and date of agreement was not morethan two to three days. 6. In support of his argument that compulsions of business was a good reason for exclusion for the application of Section 40A(3) of the Act, ld. AR placed reliance on a judgment of Hon ble Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,00,000 2 Thillu Mullu K. Senthil 12.06.2013 12.06.2013 14.06.2013 1,00,000 3 Varuthapadatha Valibar Sangam K . Senthil 05.09.2013 05.09.2013 06.09.2013 5,00,000 4 Panaiyarum Padminiyum Trident Movies 06.02.2013 06.02.2013 07.02.2013 25,000 5 Neram Red Gaint Movies 08.05.2013 08.05.2013 17.05.2013 (Release Date postponed) 25,000 6 Vanakkam Chennai Red Gaint Movies 09.10.2013 09.10.2013 11.10.2013 50,000 7 Thagararu Red Gaint Movies 04.12.2013 04.12.2013 06.12.2013 25,000 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000 5 Vanmam Five Star Pictures 20.11.2014 20.11.2014 21.11.2014 40,000 6 Anjaan Thirupathi Brothers 12.08.2014 12.08.2014 15.08.2014 10,00,000 7 Aranmanai Sri Thenandal Films 18.09.2014 18.09.2014 19.09.2014 1,50,000 8 Tirudan Police Sri Thenandal Pictures 14.11.2014 14.11.2014 15.11.2014 25,000 9 Mosakutty AK Movies 27.11.2014 27.11.2014 28.11.2014 25,000 10 Megamann AK Movies 23.12.2014 23.12.2014 25.12.2014 1,00,000 11 Isai AK Movies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Green 19.12.2013 19.12.2013 20.12.2013 1,50,000 9 Pulivaal Gopuram Films 05.02.2014 05.02.2014 07.02.2014 50,000 Total 6,35,000 Ld. Counsel for the assesseess has admitted that each of the parties to whom payments were effected were established players in the field of film production. What I find is that in the case of the assessee, M/s. Lena Talkies, the total expenditure claimed for purchasing film right for previous year relevant to assessment year 2014-2015 was ₹ 58,07,705/-. Such expenditure incurred by them for previous year relevant to assessment year 2015-2016 is not available on records. In the case of M/s. Vaduganathan Talkies expenditure claimed for purchase of film rights for the previous year relevant to assessment year 2014-2015 came to ₹ 17,52,500/-. Obviously substantial part of the total payments for purchase of film rights were made in cash. It is not as though that such payments were of an insignificant part of the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iring them to effect payments in cash. 10. Coming to the judgment of Hon ble Gujarat High Court in the case of Anupam Tele Services (Supra) relied on by the ld. AR, cash payments made by the concerned assessee to M/s. Tata Teleservices Ltd was due to a reason that the said M/s. Tata Teleservices Ltd was not accepting cheques/Demand drafts of a Co-operative bank with whom the concerned assessee was having an account. That apart, M/s. Tata Teleservices Ltd had required all its channel partners/ distributors in Gujarat to make payment in cash, for getting recharge vouchers on an urgent basis. In my opinion the fact situation in the said case was entirely different and have no relevance to the facts here. As for the decision of Co-ordinate Bench in the case of M/s.Trident Movies (supra), payments effected were in a rural area to technicians, artists who were involved in TV serial shooting. Similarly in the case of M/s. Safeway Dredging Enterprises (supra) payments effected was by a contractor at its work-site for purchase of construction materials, spare parts etc. Both these decisions were given on entirely different set of facts. In such circumstances, I am of the opinion that low ..... X X X X Extracts X X X X X X X X Extracts X X X X
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