Madhusudhana Reddy, CHENNAI V. DCIT, CHENNAI

ITA 1727/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7491 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 09-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Wrong claim; Corroborative evidences; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 271(1)(c); 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(a)(ia); 13

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L REDDY, JUDICIAL MEMBER ./ ITA NOS.:1601/MDS/2016 / ASSESSMENT YEAR : 2010-11 THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 20(1), CHENNAI 34. V. SHRI. MADHUSUDHANA REDDY, NO 4/663, MAIN ROAD, MAHALAKSHMI NAGAR, PADIANALLUR, REDHILLS, CHENNAI -52. PAN: AHYPM9288P ( /APPELLANT) ( /RESPONDENT) ./ ITA NOS.:1726,1727 & 1728/MDS/2016 / ASSESSMENT YEARS : 2010-11, 2010-11 & 2011-12 SHRI. MADHUSUDHANA REDDY, NO 4/663, MAIN ROAD, MAHALAKSHMI NAGAR, PADIANALLUR, REDHILLS, CHENNAI -52. PAN: AHYPM9288P V. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 20(1), CHENNAI 34. ( /APPELLANT) ( /RESPONDENT) /ASSESSEE BY : SHRI K. MEENAKSHISUNDARAM, ADVOCATE /REVENUE BY : SHRI SHIVA SRINIVAS, JCIT /DATE OF HEARING : 09.02.2017 /DATE OF PRONOUNCEMENT : 17.03.2017 / O R D E R 2 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THE APPEAL IN ITA NO.1726/MDS./16 BY ASSE SSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(A)-14, CHENNAI DATED 29.02.2016 PERTAINING TO THE ASSESSME NT YEAR 2010-11 AND THE CROSS APPEALS IN ITA NO.1727/MDS./16 & ITA NO.1601/MDS./16 FOR THE ASSESSMENT YEAR 2010-11 BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(A)- 14, CHENNAI DATED 29.02.2016 PASSED UNDER SECTION 2 71(1)(C) DATED 29.02.2016. ANOTHER APPEAL IN ITA NO.1728/MDS./16 FOR ASSESSMENT YEAR 2011-12 OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-14, CHENNAI DATED 29. 02.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. SINCE ISSUES INVOLVED IN ALL THESE REVENUES APPEAL AS WELL AS ASSESSEES APPEALS ARE COMMON IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ITA NO.1726/MDS./16 (ASSESSEES APPEAL: A.Y 2010-1 1) 2.1 AT THE TIME OF HEARING, THE LD. AR SUBMITTED T HAT THE ASSESSEE IS NOT INTERESTED TO PRESS GROUND NOS.1, 2 &. 3. ACCO RDINGLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 2.2. NOW, THE GROUND NOS. 4 ,5 & 6 FOR OUR CONSIDE RATION IS WITH REGARD TO DISALLOWANCE OF ` 45,84,082/- IS SAID TO BE INCURRED BY THE 3 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 ASSESSEE TOWARDS EXHIBITION OF FILMS TAKEN ON MINIM UM GUARANTEE BASIS ON ADVERTISEMENT AND OTHER RELATED EXPENSES. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IN CURRED EXPENSES TO AN EXTENT OF ` 45,84,082/- TOWARDS EXPENDITURE ON PURCHASE OF DTS DISCS., PURCHASE OF POSTERS, ISSUE OF ADVERTISEMENT , PURCHASE OF FILM PRINTS IN RESPECT OF FILMS MAHATMA, AVATHAR, AKASA RAMANA AND NAMASTE LONDON. THE AO OPINED THAT THE FILMS INVOLVED WERE PURCHASED UNDER MINIMUM GUARANTEE BASIS AND HENCE THE EXPENDITURE D ID NOT QUALIFY FOR DEDUCTION UNDER RULE 9B OF THE INCOME TAX RULES, 19 62. ALTHOUGH, THE AO DISALLOWED ` 71,43,420/-, THE FOLLOWING EXPENSES OF ` 45,84,082 LISTED OUT IN THE ASSESSMENT ORDER ARE AS FOLLOWS:- EXPENDITURE AMOUNT INCURRED AGAINST (TAKEN FROM LEDGER) PURCHASE DTS DISK 2,93,420 MAHATMA PURCHASE POSTERS 13,41,662 AVATAR, MAHATMA PURCHASE ADVETISEMENT 24,00,000 AVATAR PURCHASE FILM PRINT 5,50,000 NO LEDGER TOTAL 45,84,082 AGAINST THIS, ASSESSEE CARRIED THE APPEAL BEFORE TH E LD.CIT(A). ON APPEAL, THE LD.CIT(A) OBSERVED THAT AS CAN BE SEEN FROM THE EXPLANATION BELOW RULE 9B(1), THE EXPENDITURE INCUR RED IN CONNECTION WITH ADVERTISEMENT OF A FILM IS NOT ALLOWABLE AS A DEDUCTION WHERE THE FILM RIGHTS HAVE BEEN ACQUIRED ON A MINIMUM GUARANT EE BASIS BY A FILM DISTRIBUTOR. FURTHER, LD.CIT(A) OBSERVED THAT THE A O NOTED IN THE 4 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 ASSESSMENT ORDER THAT THE AGREEMENTS ENTERED BETWEE N THE FILM PRODUCERS AND THE ASSESSEE, THE EXPENDITURE RELATED TO ADVERTISEMENT HAS TO BE INCURRED BY THE PRODUCER. THUS, THE LD.CI T(A) ARRIVED AT A CONCLUSION THAT THE AO HAS RIGHTLY DISALLOWED THE E XPENDITURE OF ` 45,84,082 INCURRED WITH REGARD TO ADVERTISEMENT OF THE FILMS ACQUIRED ON MINIMUM GUARANTEE BASIS BY THE ASSESSEE AND CONFIRM ED THE DISALLOWANCE. HENCE, THE ASSESSEE IS IN APPEAL BEFO RE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE CLAIM OF ASSESSEE CANNO T BE ALLOWED IN VIEW OF THE EXPLANATION BELOW THE RULE 9B(1) OF THE INCO ME TAX RULES, 1962. THE ASSESSEE INCURRED EXPENSES IN CONNECTION WITH A DVERTISEMENT OF FILM WHERE THE FILM RIGHTS HAVE BEEN ACQUIRED ON A MINIM UM GUARANTEE BASIS BY A FILM DISTRIBUTOR. FURTHER, IT IS ALSO BROUGHT ON RECORD THAT AS PER THE AGREEMENT ENTERED BETWEEN FILM PRODUCERS AND THE AS SESSEE, THE EXPENSES RELATED TO THE ADVERTISEMENT HAS TO BE INC URRED BY THE PRODUCERS, THEREFORE, IT WAS RIGHTLY DISALLOWED BY THE LOWER AUTHORITIES, AND THERE IS NO LIABILITY AS THE ASSESSEE IS NOT LI ABLE TO INCUR ANY SUCH EXPENDITURE ON THIS COUNT AND IT IS THE DUTY OF THE PRODUCER TO INCUR THE EXPENDITURE. ACCORDINGLY, WE UPHELD THE ORDER OF T HE LOWER AUTHORITIES. HENCE, THIS GROUND RAISED BY THE ASSESSEE IS REJECT ED. 5 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 5. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O DISALLOWANCE OF AGRICULTURAL INCOME OF ` 7,45,000/- AS THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE FOR ITS NATURE OF BEING AN AGRICULTURAL IN COME, AND THAT INCOME IS TREATED BY THE REVENUE AS INCOME FROM OTHER SOU RCES. 6. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS HAVING AGRICULTURAL LANDS AT THIRUNEERMALAI AND POPPALAGUDA VILALGE RAN GA REDDY DISTRICT, ANDHRA PRADESH. THE ASSESSEE ADMITTED AGRICULTURAL INCOME TO AN EXTENT OF ` 7,45,000/- FROM THESE LANDS. IN THE ASSESSMENT ORD ER, THE AO VERIFIED THE CLAIM OF AGRICULTURAL INCOME AND THE A SSESSEE IS ASKED TO PRODUCE THE EVIDENCES FOR AGRICULTURAL INCOME EARN ED AND BILLS FOR EXPENSES INCURRED FOR SUCH INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE ADMITTED BEFORE THE AO T HAT HE DOES NOT HAVE ANY EVIDENCE TO PROVE THE GROSS RECEIPTS FROM AGRICULTURAL INCOME. THEREFORE, THE AGRICULTURAL INCOME IS ADDED BY THE AO TO INCOME OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD. ASSESSING O FFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) OBSERVED THAT IN THE ABSENCE OF EVIDENCE IN SUPPORT ING THE CLAIM OF ASSESSEE, THERE IS NO ERROR ON THE PART OF THE AO I N ASSESSING THE AMOUNT OF ` 7,45,000/- AS INCOME FROM OTHER SOURCES. AGAINST TH E ORDER OF LD.CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 6 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE STATED THAT HE O WNS VAST AREA OF AGRICULTURAL LAND, THERE WAS NO IOTA OF EVIDENCE RE GARDING CULTIVATION CARRIED ON BY THE ASSESSEE WITH REFERENCE TO NATURE OF CROP GROWN, LABOURERS EMPLOYED, OR ANY DETAILS OF EXPENDITURE I NCURRED OR PRODUCTS SOLD. IN THE ABSENCE OF THESE PARTICULARS, IT IS N OT POSSIBLE FOR DEPARTMENT TO GIVE BENEFIT OF AGRICULTURAL INCOME T O THE ASSESSEE. SINCE THE ASSESSEE PLACED NO EVIDENCE REGARDING AGRICULTU RAL INCOME, THE BURDEN CAST UPON THE ASSESSEE, NOT SHIFTED TO THE R EVENUE AUTHORITY AS TO PROVE THAT THERE IS NO AGRICULTURAL INCOME. ACCO RDINGLY, WE UPHELD THE ORDER OF LOWER AUTHORITIES. THEREFORE, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. THUS, THE APPEAL IN ITA NO.1726/MDS./ 16 IS DISMISSED. ITA NO.1727/MDS./16 & ITA NO.1601/MDS./16 (A.Y: 2011-12) 8. THE COMMON GROUND IN THESE APPEALS IS WITH REGA RD TO LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 8.1 THE FACTS OF THE ISSUE ARE THAT THE AO CONSIDE RED THE FOLLOWING DISALLOWANCES FOR LEVY OF PENALTY UNDER SECTION 271 (1)(C) OF THE ACT. WRITTEN OFF CLAIM OF EXPENDITURE : 71,43,420/- INCOME DISCUSSED AS AGRICULTURAL INCOME 7 ,45,000/- ` 78,88,420/- 7 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 THE AO LEVIED THE PENALTY @ 100% OF TAX SOUGHT TO B E EVADED. AGGRIEVED, THE ASSESSEE CARRIED THE APPEAL BEFORE T HE LD.CIT(A). ON APPEAL, THE LD.CIT(A) CONFIRMED THE PENALTY LEVIED BY THE LD. ASSESSING OFFICER IN RESPECT OF TREATMENT OF AGRICULTURAL INC OME AS INCOME FROM OTHER SOURCES. 8.2 HOWEVER, REGARDING WRITTEN OFF THE CLAIM OF EX PENDITURE TOWARDS ADVERTISEMENT OF FILM, HE OBSERVED THAT MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME REGARDING INCOME OF ASSESSEE. THE DISALLOWANCE MADE FOR CONTRAVENTION OF THE RULE 9B IS NOTHING B UT A CASE OF WRONG CLAIM ON THE PART OF ASSESSEE AND NO CONCEALMENT OF SUCH IS INVOLVED AND IT IS NOT A FALSE CLAIM, SO PENALTY CANNOT BE LEVIE D UNDER SECTION 271(1)(C) OF THE ACT. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. REGARDING SUSTENANCE OF PENALTY AND TREATMENT OF AG RICULTURAL INCOME AS NON-AGRICULTURAL INCOME, THE ASSESSEE IS IN APPEAL BEFORE US. 8.3 BEFORE US, LD.A.R SUBMITTED THAT MERE BECAUSE THE ASSESSEE WAS NOT ABLE TO PRODUCE DETAILS OF AGRICULTURAL INCOME, IT CANNOT BE CONSIDERED FOR LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE ACT. ACCORDING TO HIM, SINCE THE AO HAS NOT DOUBTED THE HOLDING OF AGRICULTURAL LAND AND THE INCOME OF ASSESSEE WAS TR EATED AS NON- AGRICULTURAL INCOME ONLY ON THE REASON THAT THE ASS ESSEE HAS NOT 8 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 PRODUCED THE RELEVANT DETAILS OF AGRICULTURAL INCOM E THAT ITSELF CANNOT LEAD TO CONCLUSION THEREOF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. LD.A.R PLEADED TO DELETE TH E PENALTY. 8.3.1. REGARDING LEVY OF PENALTY ON DISALLOWANCE O F EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS ADVERTISEMENT. LD.A.R SUBMI TTED THAT IT IS NOT A FALSE CLAIM. FURTHER, HE RELIED ON THE JUDGMENET OF SUPREME COURT IN THE CASE OF RELAINCE PETROPRODUCTGS (P.) LTD. IN [2010 ] 322 ITR 158 (SC) WHEREIN HELD THAT:- A GLANCE AT THE PROVISIONS OF SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961,SUGGESTS THAT IN ORDER TO BE COVERED BY I T, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1)(C) WOULD EMBRACE THE DETAILS OF THE CLAIM MA DE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCO RRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF F URNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSE SSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISIO N, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGI NATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHIN G WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO BE INACC URATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETA ILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. 9 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOU S OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 2 71(1)(C) . A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNO T AMOUNT TO FURNISHING INACCURATE PARTICULARS. 9. ON THE OTHER HAND, LD.D.R SUBMITTED THAT IT IS NOT A WRONG CLAIM BY THE ASSESSEE AND IT IS A FALSE CLAIM AND HAD IT BEEN THERE NO SCRUTINY, THE ASSESSEE WOULD HAVE ESCAPED AND GOT THE RELIEF, HENCE HE PRAYED THAT THE LEVY OF PENALTY TO BE CONFIRMED. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE INCOME OF ASSESSEE IS TAK EN FILM DISTRIBUTION OF RIGHTS FROM PRODUCERS. THE ASSESSEE HAS ACQUIRED T HE FILMS ON MINIMUM GUARANTEE SCHEME AND AS PER THE AGREEMENT, THE ASSE SSEE HAS NOT REQUIRED TO SPEND ANY ADVERTISEMENT EXPENSES. EXPLA NATION BELOW RULE 9B OF THE INCOME TAX RULES SHOW THAT THE COST OF AC QUISITION IN RELATION TO FEATURE FILM MEANS THE AMOUNT PAID BY THE FILM D ISTRIBUTORS TO PRODUCERS FOR ACQUIRING THE RIGHTS OF EXHIBITION A ND WHERE THE RIGHTS OF EXHIBITION HAS BEEN CONFERRED ON A MINIMUM GUARANT EE BASIS, THE MINIMUM AMOUNT GUARANTEED, NOT BEING- I) THE AMOUNT OF EXPENDITURE INCURRED BY THE F ILM DISTRIBUTOR FOR THE PREPARATION OF THE POSITIVE OF THE FILM AND II) THE EXPENDITURE INCURRED BY HIM IN CONNECTIO N WITH THE ADVERTISEMENT OF THE FILM. 10 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 HOWEVER, THE ASSESSEE CLAIMED AN EXPENDITURE OF ` 45,84,082/- TOWARDS ADVERTISEMENT FOR THE ASSESSEE IS NOT ENTITLED. IN RESPECT OF THIS, THE ASSESSEE MADE AN EFFORT TO CLAIM THAT EXPENDITURE. AS RIGHTLY POINTED OUT BY THE LD.D.R, HAD IT BEEN NO SCRUTINY, THE ASSESSE E WOULD HAVE ESCAPED AND WOULD HAVE GOT DEDUCTION TOWARDS THIS EXPENDITU RE AND IN OUR OPINION THIS IS A FALSE CLAIM BY THE ASSESSEE AND I T IS NOT A WRONG CLAIM SO AS TO APPLY THAT RATIO LAID DOWN BY THE SUPREME COU RT IN THE CASE OF RELAINCE PETROPRODUCTGS (P.) LTD. (SUPRA). ACCORDIN GLY, WE CONFIRM THE ORDER OF LD.CIT(A) AND THE RESTORE THE ORDER OF THE AO AND CONFIRM THE LEVY OF PENALTY ON THIS ISSUE. HENCE, THE GROUND RAISED BY THE REVENUE IS ALLOWED. 10.1 REGARDING AGRICULTURAL INCOME, OTHER THAN HO LDING OF THE LAND, THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE R EGARDING CARRYING ON AGRICULTURAL OPERATIONS IN THE SAID LAN D. LD.A.R MADE AN ORAL ARGUMENT THAT THE ASSESSEE IN REAL SENSE CARRY ING THE AGRICULTURAL OPERATIONS. THE BENCH ASKED THE LD.A. R WHETHER THE ASSESSEE IS IN A POSITION TO PLACE ANY EVIDENCE TO THIS EFFECT, FOR WHICH THE ANSWER FROM LD.A.R IS NEGATIVE. IF THE AS SESSEE CARRIED ON AGRICULTURAL OPERATIONS, AT LEAST THERE WOULD HAVE BEEN CERTAIN RECEIPTS OF SALE OF AGRICULTURAL PRODUCTS OR EVIDEN CE REGARDING EXPENDITURE INCURRED. WITH REFERENCE TO EXPENSES RE LATING TO AGRICULTURAL ACTIVITIES, THE ASSESSEE IS NOT HAVING ANY EVIDENCE, WE ARE OF THE OPINION THAT ASSESSEE MADE AN ATTEMPT TO SHOW THE NON 11 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 AGRICULTURAL INCOME AS AGRICULTURAL INCOME AND BECA USE OF SCRUTINY, THE AO IS ABLE TO FIND OUT THE CLAIM AS FALSE AND T HE SAME WAS CONSIDERED FOR INCOME FROM OTHER SOURCES. ACCORDIN GLY, THIS KIND OF CONDUCT OF THE ASSESSEE WARRANTS LEVY OF PENALTY UN DER SECTION 271(1)(C) OF THE ACT, WHICH IS NOTHING BUT FURNISHI NG INACCURATE PARTICULARS OF INCOME AND LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE ACT IS CONFIRMED. THE APPEAL OF ASSESSEE IN ITA NO.1727/MDS./16 IS DISMISSED AND THE APPEAL OF REVE NUE IN ITA NO.1601/MDS./16 IS ALLOWED. ITA NO.1728/MDS./16 (ASSESSEES APPEAL: A.Y 2011-1 2) 11. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE OF ` 24,80,664/- INCURRED TOWARDS FILM DISTRIBUTION COMM ISSION AS THEY DO NOT DEDUCT THE TDS IN TERMS OF SEC.40(A)(IA) OF THE ACT. 11.1. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAIM AN EXPENDITURE OF ` 24,80,664/- AS FILM DISTRIBUTION COMMISSION ON WHIC H THE ASSESSEE HAD NOT DEDUCTED TDS. AS SUCH, THE AO INVOKED THE P ROVISIONS OF THE SEC.40(A)(IA) OF THE ACT. THE CONTENTION OF THE LD .A.R IS THAT NET COLLECTION FROM THE DISTRIBUTION OF FILM WAS HANDE D OVER TO THE ASSESSEE BY M/S.GEETHA FILMS AFTER RETAINING 5% OF THE COLLE CTIONS AS DISTRIBUTION COMMISSION FOR THEIR SERVICES AND THEREFORE THE PRO VISIONS OF THE SEC.40(A)(IA) OF THE ACT IS NOT APPLICABLE AS THERE WAS NO PAYER AND 12 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 PAYEE RELATIONSHIP BETWEEN GEETHA FILMS AND THE A SSESSEE. IN OUR OPINION, THE ARGUMENT OF ASSESSEE IS DEVOID OF MERI TS. WHENEVER, THE ASSESSEE HAS CLAIMED ANY EXPENSES AS COMMISSION IN TERMS OF SEC.40(A)(IA) OF THE ACT, THE ASSESSEE IS DUTY BOUN D TO DEDUCT THE TDS AND PAID THE TDS TO THE GOVERNMENT EXCHEQURER BEFO RE THE DUE DATE OF FILING THE RETURN OF INCOME. THE ASSESSEE IS NOT I N A POSITION TO PLACE ANY EVIDENCE WITH THIS RESPECT AND THE LD.A.R ARGUED T HAT THERE IS NO RELATION BETWEEN THE PAYEE AND PAYER, BETWEEN THE THE GEETHA FILM DISTRIBUTION AND THE ASSESSEE. THIS ARGUMENT HOLDS NO WATER. HOWEVER, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF A O IN VIEW OF THE JUDGEMENT OF SPECIAL BENCH IN THE CASE OF MERILYN S HIPPING AND TRANSPORT VS. ACIT IN [2012- 16 ITR (TRIB) 1 (VISAK HAPATNAM)(SB) AND IN THE CASE OF SHRI N.PALANIVELU VS. ITO REPORTED I N [2015] 40 ITR (TRIB) 325 [CHENNAI] VIDE ORDER DATED 29.04.2015 WH EREIN HELD THAT:- 4. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERI AL ON RECORD. WE FIND THAT THE SPECIAL BENCH OF THE TR IBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS V. A DDL. CIT [2012] 16 ITR (TRIB) 1 (VISAKHAPATNAM) [SB] AND JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF C IT V. VECTOR SHIPPING SERVICES (P.) LTD. IN I. T. A. NOS. 122 OF 2013 DATED JULY 9, 2013 [2013] 357 ITR 642 (ALL) HE LD THAT SECTION 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTANDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESSMENT YEAR IN RESPECT OF THESE PAYMENTS. HOWEVER, THE ASSESSEE HAS NOT BROUGHT ON 13 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 RECORD, THE DETAILS OF OUTSTANDING EXPENSES OR SCHE DULE OF SUNDRY CREDITORS SHOWING WHETHER THE IMPUGNED AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR EITHE R IN THE NAME OF THE PARTY OR OUTSTANDING EXPENSES. HENC E, IN THE INTEREST OF JUSTICE, WE ARE REMITTING THE IS SUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND THE ASSESSEE SHALL PL ACE NECESSARY EVIDENCE IN SUPPORT OF HIS CLAIM. 5. FURTHER, WE MAKE IT CLEAR THAT IF THE IMPUGNED A MOUNT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THE ASSESSMENT YEAR IN RESPECT OF THE EXPENSES EITHER A S OUTSTANDING EXPENSES OR AS SUNDRY CREDITORS, THIS AMOUNT CANNOT BE DISALLOWED. THIS GROUND IS REMITTE D BACK TO THE ASSESSING OFFICER FOR FRESH CONSIDERATI ON. ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER TO EXAMINE WHETHER THE PAYMENT IS ALREADY MADE AND IT IS NOT OUTSTANDING AT THE END OF THE CLOSE OF THIS FINANCIAL YEAR RELE VANT TO ASSESSMENT YEAR 2010-11 AND BE ALREADY PAID, NO DISALLOWANCE IS WAR RANTED UNDER SEC.40(A)(IA) OF THE ACT. WITH THIS OBSERVATION, WE REMIT THE ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 12. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE OF ` 11,94,434/- BEING 20% OF THE DISTRIBUTION EXPENSES CLAIMED. 14 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 13. THE AO DISALLOWED HE CLAIM OF 20% OF DISTRIBUT ION EXPENSES IN THE ABSENCES OF VOUCHERS AND OTHER RELATED SUPPORTING E XPENSES. ADMITTEDLY, THE ASSESSEE HAD NOT PRODUCED THE BILLS, VOUCHERS AND O THER RELATED SUPPORTING EVIDENCES. IN OUR OPINION, THE DISALLOWANCE OF DIST RIBUTION EXPENSES @ 20% MADE BY THE AO IS ON HIGHER SIDE. CONSIDERING THE N ATURE OF DISTRIBUTION, WE ARE INCLINED TO ARRIVE AT ALLOWING 10% OF THE DISTR IBUTION EXPENSES AGAINST 20% MADE BY THE LD. ASSESSING OFFICER AS NOT SUPPOR TED BY THE VOUCHERS. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 13.1. THIS APPEAL OF ASSESSEE IN ITA NO.1728/MDS./1 6 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 14 TO SUM UP, THE APPEAL ASSESSEE IN ITA NO.1726/M DS./16 IS DISMISSED AND APPEAL ASSESSEE IN ITA NO.1728/MDS./16 IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS APPEALS REGARDING LEVY OF PE NALTY, THE APPEAL ASSESSEE IN ITA NO.1727/MDS./16 IS DISMISSED AND THE REVENUE APPEAL IN ITA NO.1601/MDS./16 IS ALLOWED. ORDER PRONOUNCED ON 17 TH MARCH, 2017 AT CHENNAI. SD/- SD /- ( (( ( ) )) ) ( ) (DUVVURU R.L REDDY) (CHAN DRA POOJARI) /JUDICIAL MEMBER / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 17 TH MARCH, 2017. KSSUNDARAM. 15 I.T.A. NO. 1601, 1726 TO 1728/MDS/2016 /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF.