ACIT 11(1), MUMBAI V. LEELA GHOSH, MUMBAI

ITA 172/MUM/2011

• Counselvise Citation: 17219914 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 194C

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI . , ! ' #'' '$ , % ! & BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 172 / / 2011 A.Y. 2007-08 ITA NO. : 172/MUM/2011 (ASSESSMENT YEAR: 2007-08) . : 7110 / / 2011 A.Y. 2008-09 ITA NO. : 7110/MUM/2011 (ASSESSMENT YEAR: 2008-09) . : 6549 / / 2012 A.Y. 2009-10 ITA NO. : 6549/MUM/2012 (ASSESSMENT YEAR: 2009-10) ACIT11(1), AAYAKAR BHAWAN, M K ROAD, MUMBAI -400 020 VS MS LEELA GHOSH, B-2/28, GREEN FIELD, OFF. MAHAKALI ROAD, ANDHERI (W), MUMBAI -400 093 (APPELLANT) (RESPONDENT) CROSS OBJECTION 223/MUM/2012 ARISING OUT OF ITA NO. : 172/MUM/2011 (ASSESSMENT YEAR: 2007-08) CROSS OBJECTION 194/MUM/2012 ARISING OUT OF ITA NO. : 7110/MUM/2011 (ASSESSMENT YEAR: 2008-09) CROSS OBJECTION 293/MUM/2013 ARISING OUT OF ITA NO. 6549/MUM/2012 (ASSESSMENT YEAR: 2009-10) MS LEELA GHOSH (BY HER L/H MRS. MONA SHETTY), MUMBAI -400 093 PAN: AECPG 7783 G VS ACIT11(1), MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT CROSS OBJECTOR BY : SHRI SHAILESH SHAH RESPONDENT REVENUE BY : SHRI M L PERUMAL /DATE OF HEARING : 29-01-2014 / DATE OF PRONOUNCEMENT : 19-02-2014 ) O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE THREE TABULATED APPEALS SHOWN BELOW, ARE FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE CIT(A), MUMBAI: ASSESSMENT YEARS ORDER DATED DISALLOWANCE 2007-08 07.10.2010 61,69,268 2008-09 30.08.2011 1,00,25,976 2009-10 08.08.2012 37,63,839 ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 2 2. THE ASSESSEE, HAS ALSO FILED CROSS OBJECTIONS (COS), AGAIN ST THE ORDER IMPUGNED BY THE DEPARTMENT, IN THE ABOVE APPEALS, AS SHOWN. SINCE THE ISSUES ARE COMMON IN ALL THE APPEALS AND CO, WE, FOR THE SAKE OF CONVENIENCE AND BREVITY ARE PASSING A COMMON AN D CONSOLIDATED ORDER. 3. IN ALL THE ABOVE THREE APPEALS, AS FILED BY THE DEPART MENT, THE ISSUE PERTAINS OF REVERSING THE DECISION OF THE AO ON DISA LLOWANCE MADE U/S 40(A)(IA). 4. THE FACTS ARE THAT THE ASSESSE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF SOUND RECORDING, DUBBING AND OTHER ANCILLAR Y POST PRODUCTION ACTIVITIES FOR MOVIES AND SERIALS AT HER OWN SOU ND RECORDING STUDIOS. WHILE DOING SO, WHEN THE PAYMENT IS MADE TO ARTIST , SHE DEDUCTS TAS @ 10% U/S 194J. ON THE OTHER HAND, THERE ARE TIMES, WHEN THE ASSESSEES STUDIO IS NOT EQUIPPED FOR CERTAIN S PECIALISED JOBS, SHE ENGAGES OTHER STUDIOS, WHERE SHE AND HER TEAM GOE S FOR DOING THE JOB. IN THOSE STUDIOS, NEITHER THE ASSESSE NOR HER TEAM IS ALLOWED TO PARTICIPATE IN THE WORKING WITH THE MACHINES AND OTHER SO UND RECORDING/DUBBING EQUIPMENT. THOSE STUDIOS ARE RUN AND MAINTAINED AND OPERATED BY THOSE PERSONS ONLY. ACCORDING TO THE ASSESSEE, SINCE THE ASSESSEE ONLY GETS HER JOB DONE FROM THE STUDIOS ON OUTSOURCING TERMS AND CONDITIONS AND NOTHING IS HIRED, THE ASSESSE PA YS THOSE STUDIOS THEIR PAYMENTS AFTER DEDUCTING TAS @ 2%, AS, ACCO RDING TO THE ASSESSE, SHE ONLY PAYS THEM FOR JOB WORK TO THE STUDIOS. 5. THIS MODUS OPERANDI WAS EXPLAINED TO THE AO, WHO AFTE R CONSIDERING THE EXPLANATION HELD THAT THE PAYMENTS MADE TO RECORDING/DUBBING STUDIOS BY THE ASSESSE WERE IN THE NA TURE OF FTS AND LIABLE FOR HIGHER TDS AND NOT CONTRACTOR U/S 194C FOR LOWER TDS. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF DELHI HIGH C OURT IN THE CASE OF CIT VS BHARAT CELLULAR LTD, REPORTED IN 175 TAXMA N 573, WHEREIN IT WAS HELD THAT FACILITIES PROVIDED BY STUDIOS FOR THE USE OF ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 3 EQUIPMENTS/MACHINES OWNED BY THEM COULD NOT BE REGARDED AS FTS AS CONTEMPLATED U/S 9(1)(VII) READ WITH SECTION 194J. 6. THE ASSESSING OFFICER, THEREFORE, ON THIS BASIC CONTRADIC TORY EXPLANATION, DECIDED TO DISALLOW THE PAYMENT U/S 40(A)(IA). 7. THE ASSESSE ALSO PLACED RELIANCE ON THE DECISION OF HIND USTAN COCOLAB BEVERAGES (P) LTD VS CIT, REPORTED IN 293 ITR 22 6 (SC), WHEREIN IT WAS HELD THAT WHERE THE RECIPIENT OF THE MOVIE S HAS PAID TAXES ON THE AMOUNT RECEIVED FROM THE PAYER, DEPARTMEN T CANNOT RECOVER TAX ON THE SAME INCOME, HOLDING THE DEDUCTOR/PA YER TO BE IN DEFAULT FOR SHORTFALL. 8. THE ASSESSEE, TOOK HER GRIEVANCE TO THE CIT(A) AND R EITERATED THE SUBMISSIONS AND EXPLANATIONS MADE BEFORE THE AO. THE CIT(A ), AFTER CONSIDERING THE DETAILED REPLIES OF THE ASSESSEE, HELD, 2.3.3 THE PAYMENTS CONCERNED CANNOT BE CONSIDERED A S PROFESSIONAL SERVICE FEE WITHIN THE MEANING OF SECTION 194J. THEY ARE ALSO NOT COVERED UNDER TECHNICAL SERVICE FEES UNDER SECTION 194J AS THE WORK ASSIGNED M AY BE CONDUCTED ON TECHNICAL EQUIPMENT, BUT THERE IS NO PROVISION OF TECH NICAL SERVICE AS HELD BY HONBLE COURT DECISIONS DISCUSSED SUPRA. AO HAS SUMMARIL Y REJECTED APPELLANTS SUBMISSION THAT STUDIOS ARE NOT EXCLUSIVELY US ED BY THEM AND STUDIOS PROVIDING SERVICES AS IN COMMON CONTRACTUAL SERV ICES, AS HAVING NO BEARING ON APPELLANTS CASE. IT IS SEEN THAT THE STUDIO C HARGES PAID BY APPELLANT FOR TEMPORARY OR PARTIAL USE OF STUDIO CHARGES PAID BY APPELLANT FOR TEMPORARY OR PARTIAL USE OF STUDIO AND EQUIPMENT INCLUDE ALSO SERV ICES PROVIDED BY VARIOUS INDIVIDUALS. FURTHER, PAYMENTS MADE DO NOT BIFURCATE AM OUNTS FOR DIFFERENT CHARGES I.E. FOR STUDIO PREMISE, FOR PLANT AND MACHINERY , FOR LABOUR OR FOR SERVICES. AS SUCH THESE PAYMENTS CANNOT BE CONSIDERED AS RENT FOR PURPOSE OF SECTION 194J. 2.3.4 THE APPELLANTS PAYMENTS THUS SEEM TO BE FOR A C OMPOSITE WORK. AND WHILE THE CONTRACTS MAY BE VERBAL THIS FACT WOULD NOT RENDER DED UCTION U/S 194C AS INCORRECT. 2.3.5 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE ABSENCE OF CLEAR AND ADEQUATE REASONING AND/OR FINDINGS BY THE AO IN RESPEC T OF EACH PAYMENT MADE, ALL PAYMENTS CONSIDERED BEING COVERED U/S 194I A ND 194J SIMULTANEOUSLY AND THE POINTS DISCUSSED SUPRA, THE DISAL LOWANCE MADE BY THE AO U/S 40(A)(IA) IS HELD TO BE NOT SUSTAINABLE. THE ADDIT ION IS ACCORDINGLY DELETED. 9. THE CIT(A), THUS DELETED THE ADDITION ON DISALLOWANCE MAD E U/S 40(A)(IA). 10. AGAINST THIS ORDER, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 11. BEFORE US, THE DR PLACED RELIANCE ON THE ORDER OF THE AO. ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 4 12. ON THE OTHER HAND, THE AR PLACED RELIANCE ON THE O RDER OF THE CIT(A) ON THE IMPUGNED ISSUE AND PLEADED THAT THE ORDER OF THE CIT(A) IS NOT ONLY DETAILED BUT IS VERY REASONABLE. 13. WE HAVE HEARD THE ARGUMENTS AND HAVE GONE THROU GH THE ORDERS OF THE REVENUE AUTHORITIES. 14. THE ISSUE PERTAINS OF CONDUCT OF JOB IN THE HOME S TUDIO AND OUTSOURCED STUDIOS. THE BASIC PREMISE IS WHETHER THE ASS ESSE IS DOING THE SAME JOB OR RELATED JOB OR IS HE TAKING THE SERVICE S FOR DOING SOMETHING WHICH IS TECHNICAL FOR WHICH THE ASSESSEE IS NOT CAPABLE. WE ARE CONCERNED WITH AN INDUSTRY WHERE ONE STOP SHOP IS AND CANNOT BE AVAILABLE. 15. IT HAS BEEN NOTED FROM THE ORDER THAT THE ASSES SE DOES POST PRODUCTION SOUND RECORDING/DUBBING AT HER OWN STUDIOS. SHE ALSO HIRES OUT HER STUDIO AND HIRES STUDIOS FOR HER OWN JOB FROM OTHER STUDIOS. THE NATURE OF WORK REMAINS THE SAME, WHICH ARE, A S RIGHTLY HELD BY THE CIT(A) IS IN THE NATURE OF SUB-CONTRACT FOR THE JOB WHICH SHE HAS BEEN ASSIGNED. IT IS A FACT THAT IN THE FILM AND T V SERIAL INDUSTRY, WHERE THE DATE OF RELEASE OF FILMS OR AIRING OF TH E SERIAL IS APPROACHING, THESE STUDIOS HAVE TO COMPLETE THEIR TODAY S WORK- YESTERDAY-MEANING WHEREBY/THEREBY, THE POST PRODUCTION FACILITATORS HAVE TO REMAIN ON TOES AND BE PROACTIVE, AS ONE JOB MA Y HAVE TO BE DONE/COMPLETED AT MORE THEN ONE STUDIO. 16. IN THIS SCENARIO, THE ONLY PROVISION, WHICH CAN GET AT TRACTED IS 194C, I.E. PAYMENT FOR JOB WORK AND IN OUR OPINION THE ASSE SSE HAS RIGHTLY DEDUCTED TAS U/S 194C. 17. IN ANY CASE, APPROACHING THE ISSUE FROM ANOTHER ANG LE, I.E. EVEN IF WHAT IS OBSERVED BY THE AO IS TAKEN TO BE CORRECT, EV EN IN THAT CASE, IT WOULD ONLY AMOUNT TO SHORT DEDUCTION OF TAS. IN THAT SCENARIO AS WELL, PROVISIONS OF SECTION 40(A)(IA) DOES NOT GET ATTRACTED. ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 5 18. WE, THEREFORE, SUSTAIN THE FINDINGS OF CIT(A) IN ASSESSMEN T YEAR 2007-08 AND REJECT THE GROUND NO. 1 AS RAISED BY THE DEPARTMENT. 19. GROUNDS NO. 2 & 3 ARE GENERAL. 20. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ITA NO. 7110/MUM/2011 ASSESSMENT YEAR 2008-09 ITA NO. 6549/MUM/2012 ASSESSMENT YEAR 2009-10 21. SINCE THE EFFECTIVE GROUND IN THE TWO APPEALS, PERTAININ G TO ASSESSMENT YEARS 2008-09 AND 2009-2010, GROUND NO. 1 IS THE SAME, AS IN ASSESSMENT YEAR 2007-08. WE FOLLOW THE DECISION TA KEN BY US. WE, THEREFORE, REJECT GROUNDS NO. 1 & 2 IN BOTH THE ABOVE APPEALS. GROUNDS NO. 3 AND 4, IN BOTH THE ABOVE APPEALS ARE GENERAL IN NATURE. IN THE RESULT, ALL THE THREE APPEALS FILED BY THE DEPARTMEN T ARE DISMISSED. CROSS OBJECTION 223/MUM/2012, A Y: 2007-08 CROSS OBJECTION 194/MUM/2012, A Y: 2008-09 CROSS OBJECTION 293/MUM/2013, A Y: 2009-10 22. THE ASSESSE HAS FILED CROSS OBJECTION (CO) AGAINST THE ORDER OF CIT(A) IN ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10. 23. AT THE TIME OF HEARING THE AR SUBMITTED THAT GROUND NO. 2 IN ASSESSEES THREE COS ARE NOT BEING PRESSED. GROUND NO . 2 IN ALL THE THREE COS ARE REJECTED AS NOT PRESSED. 24. GROUND NO. 1 PERTAINS TO DISALLOWANCE OF MOTOR CAR EXP ENSES, DEPRECIATION, TRAVELLING AND TELEPHONE EXPENSES @ 20%, WHICH ARE AS FOLLOWS: ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 6 ASSESSMENT YEARS DISALLOWANCES 2007-08 77,573 2008-09 1,54,771 2009-10 2,02,999 25. AT THE TIME OF HEARING BEFORE US, THE AR VEHEMENTLY ARGUED THAT NOT ONLY THE DISALLOWANCES ARE EXCESSIVE, THEY WERE UNCA LLED FOR, AS THE ASSESSEE HAS BEEN TRAVELLING SOLELY FOR THE PURPOSES OF B USINESS. THE AR, THEREFORE, PLEADED THAT EVEN CARS WERE ONLY UTILIZED FO R THE PURPOSES OF BUSINESSES AND CARRYING HER EMPLOYEES. 27. THE AR, THEREFORE, PLEADED THAT AN APPROPRIATE VIEW M AY BE TAKEN. 28. THE DR ON THE OTHER HAND SUBMITTED THAT THE VIEWS OF THE REVENUE REASON THAT IT IS IN THE CASE OF AN INDIVIDUAL ASSE SSEE AND UNDER ALL CIRCUMSTANCES SOME PERSONAL USAGE CANNOT BE RULED OUT. 29. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND WE AGREE WITH THE CONTENTIONS OF THE DR THAT BEING THE CASE OF I NDIVIDUAL ASSESSEES PERSONAL USAGES CANNOT BE RULED OUT. BUT WE CANNOT DISREGARD THE CONTENTION OF THE ASSESSEE AS WELL, BECAUSE , WHEN WE LOOK AT THE RECEIPTS FROM HER BUSINESS AND THE NATURE OF HER OUTSTATION TRIPS AND PROVISION OF CONVEYANCE AND TELEPHONES TO HER EMPLOYEE, WE FEEL THAT THE DISALLOWANCE IS EXCESSIVE. WE, THEREFORE, ARE OF THE OPINION THAT TO MEET THE INTEREST OF JUSTICE THE FOLLOWING AD-HOC AGGREGATE DISALLOWANCE WOULD SUFFICE ON THE ABOVE EXPENSES: ASSESSMENT YEARS DISALLOWANCE MADE BY REVENUE AUTHORITIES DISALLOWANCE SUSTAINED BY US 2007-08 77573 50,000 2008-09 1,54,771 1,00,000 2009-10 2,02,999 1,25,000 30. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) IN ALL THREE YEARS & DIRECT THE AO TO MAKE A DISALLOWANCES AS ABOVE. ITA 172/MUM/2011 & 02 OTHERS + CO 223/MUM/2012 & 02 OTHERS (TOTAL 06) IN R/O OF MS LEELA GHOSH 7 31. GROUND NO. 1 IS THEREFORE, ALLOWED IN ALL THE THREE ASSE SSMENT YEARS. 32. THE COS AS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. 32. IN THE RESULT, ITA NO. 172/MUM/2011 IN ASSESSMENT YEAR 2007-08 IS DISMISSED ITA NO. 7110/MUM/2011 IN ASSESSMENT YEAR 2008-09 IS DISMISSED ITA NO. 6549/MUM/2012 IN ASSESSMENT YEAR 2009-10 IS DISMISS ED CO NO. 223/MUM/2012 IN ASSESSMENT YEAR 2007-08 IS PARTLY ALLOWED CO NO. 194/MUM/2012 IN ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWE D CO NO. 293/MUM/2013 IN ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2014. SD/- SD/- ( ) ( #'' '$ ) ! ! (RAJENDRA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 19 TH FEBRUARY, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ! !' ( ) - 3 MUMBAI / THE CIT (A)-3, MUMBAI. 4) ! !' 11, MUMBAI / THE CIT-11, MUMBAI, 5) $%& ' ( , ! ' , )*+ / THE D.R. A BENCH, MUMBAI. 6) &, - / COPY TO GUARD FILE. !./0 / BY ORDER / / TRUE COPY / / [ 1 / 2 *3 ! ' , )*+ / DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *562 . . ./