MAYA ENTERTAINMENT LTD, MUMBAI V. ITO 11(1)(2), MUMBAI

ITA 18/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83955 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-10-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 01-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: S C TIWARI MS NATASHA MANGAT

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BE NCH, MUMBAI , !' # # # # , , !' $ BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./I .T.A. NO. 18/MUM/2010 ( % % % % / ASSESSMENT YEAR : 2003-04 M/S. MAYA ENTERTAINMENT LTD., UNIT NO. 501, INTERFACE, 11 LINK ROAD, MALAD (E), MUMBAI-400 064 / VS. THE ITO 11(1)(2), AAYAKAR BHAVAN, MUMBAI-400 020 '& ./ '( ./ PAN/GIR NO. : AABCM 7192B ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: SHRI S.C. TIWARI MS. NATASHA MANGAT *+&) - , / RESPONDENT BY: SHRI VIVEK BATRA - ./ / DATE OF HEARING :13.10.2014 01% - ./ / DATE OF PRONOUNCEMENT :20.10.2014 !2 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-3, MUMBAI DT.25.11.2009 PERTAINING TO A. Y.2003-04. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN NOT ALLOWING WRITE OFF OF STOCK OF TELECAST SOFTWARE OF RS. 89,93,300/- AND WHILE DOING SO, THE LD. CIT(A) FAILED TO CONSIDER THAT HAD THE APPELLANT CLAIMED SUCH WRITE OFF IN THE FIR ST YEAR OF PRODUCTION, ITA NO. 18/M/2010 2 THE SAME WOULD HAVE LED TO CARRIED FORWARD OF LOSSE S AND SUCH BROUGHT FORWARD LOSSES WOULD HAVE BEEN LEGALLY ALLOWABLE IN THIS YEAR AND HENCE COULD NOT HAVE MADE ANY IMPACT ON THE REVENUE. 3. THE ASSESSEE IS IN THE BUSINESS OF PRODUCTION AN D SALE OF TELEVISION SOFTWARE, RENDERING TECHNICAL SERVICES AND RENDERIN G TRAINING COURSE IN ADVANCE CINEMATIC. DURING THE COURSE OF THE SCRUTI NY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS WRITTEN OFF STOCK OF RS. 1,72,54,100/- WITH RELATES TO TELE VISION SOFTWARE CAPTAIN VYOM, SARASWATI CHANDRA (GUJARATI) TDD, JALWA (PILO T) PARAJEEV (PILOT) SARASWATI CHANDRA (HINDI), CV 3D, COMPUTER GAME, MA HAVIN, IT WAS OBSERVED THAT CAPITAN VYOM, SARASWATI CHANDRA (GUJARATI) TRUCK DHINA DHIN AND CHACHA CHOUDHARY WAS ALREADY TELECASTED IN EARLIER YEARS AND REVENUE TO THE TUNE OF MORE THAN COST OF PRODUCTION WAS ALREADY REALIZED EVEN THEN ASSESSEE IS WRITING OFF REMAININ G STOCK WRONGLY AS THESE SERIALS ARE NOT TELECASTED DURING THIS YEAR A ND NO REALIZATION IS DURING THIS YEAR FROM THESE SERIALS. 3.1. THE ASSESSEE WAS ASKED TO EXPLAIN ITS STAND. THE ASSESSEE EXPLAINED THE REASONS FOR WRITE OFF IN RESPECT OF C APTAIN VYOM, SARASWATI CHANDRA TRUCK DHINA DHIN AND CHACHA CHOUDHARY. THE AO OBSERVED THAT NONE OF THESE SERIALS WERE TELECASTED DURING T HE YEAR UNDER CONSIDERATION. THE COST OF PRODUCTION WAS BROUGHT FORWARD FROM EARLIER YEARS IS WRITTEN OFF. ACCORDING TO THE AO, THE ASS ESSEE HAS NOT TREATED PROFIT AND REVENUE FROM TV SERIALS UNDER THE CORREC T PRINCIPLES OF ACCOUNTING AND AS SUCH THE COST OF PRODUCTION WRITT EN OFF IS INCONSISTENT DUE TO INCORRECT APPLICATION OF ACCOUNTING PRINCIP LES. THE AO DISALLOWED ON ACCOUNT OF WRITTEN OFF AS FOLLOWS: ITA NO. 18/M/2010 3 CAPTAIN VYOM 65,63,500/- SARASWATI CHANDRA (GUJARATI) 6,59,900/- TDD 11,19,900/- CHACHA CHAUDHARY 6,50,000/- TOTAL 89,93,300/- 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) HELD AS UNDER: FACTS AND MATERIAL ON RECORD ARE CONSIDERED. IT IS EVIDENT FROM THE DETAILS FILED BY THE APPELLANT THAT THER E IS NO CONSISTENT METHOD ADOPTED BY THE APPELLANT IN THE CASE OF WRIT E OFF OF PRODUCTION COST. IT IS SEEN THAT IN THE INITIAL YE ARS, THERE WAS NO WRITE OFF AND THEREAFTER ALSO WRITE OFF FOLLOWED NO CONSISTENT METHOD OR PERCENTAGE WHICH COULD BE RELATABLE TO TH E APPELLANTS TOTAL RECEIPTS OR RECEIPTS OF THAT YEAR. THE REASON BEHIND NO WRITE OFF IN INITIAL YEARS HAS NOT BEEN EXPLAINED EXCEPT TO SAY THAT APPELLANT PAID TAXES ON THE RECEIPTS. THEREFORE, AP PELLANTS CLAIM OF WRITING OFF BEING CONSISTENT IS NOT ESTABLISHED AND THE LOGIC OR REASONING BEHIND THE WRITE OFF CLAIMED EARLIER IS N OT CLEAR. IN THE FACTS OF THE CASE, IT IS SEEN THAT THERE IS ACTUALL Y NO METHOD OR CONSISTENCY IN THE WRITE OFF OF THE COST OF PRODUCT ION AS CLAIMED BY APPELLANT. THEREFORE, THE CLAIM FOR ENTIRE WRITE OF F THIS YEAR, WITHOUT ANY FURTHER RECEIPTS SHOWN IN RESPECT OF MA TERIAL SOUGHT TO BE WRITTEN OFF, ON GROUNDS OF CONSISTENT METHOD OF ACCOUNTING FOLLOWED BY APPELLANT IS NOT SUBSTANTIATED BY THE F ACTS OF APPELLANTS CASE. THEREFORE, RELIEF ON THIS GROUND IS NOT ESTABLISHED. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO PAGE-109 OF THE PAPER BOOK WHICH CONTAINS DETAILS OF STOCK VALU ATION AND ALSO REFERRED TO PAGE-110 WHICH CONTAINS DETAILS OF WORK-IN-PROGR ESS. IT IS THE SAY OF THE LD. COUNSEL THAT THE ASSESSEE HAS A RIGHT TO OB SERVE ANY SPECIFIC METHOD FOR THE VALUATION OF STOCK WHICH CAN BE COST PRICE OR NET REALIZABLE ITA NO. 18/M/2010 4 VALUE. IN SUPPORT, THE LD. COUNSEL RELIED UPON TWO DECISIONS OF HONBLE SUPREME COURT 24 ITR 481 AND 53 ITR 122. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE LD. CIT(A). 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT DOCUMENTARY EVIDENCE BROUGHT ON RECORD AND REFERRED TO BEFORE US. THE ASSESSEE HAS SHOWN THE DETAILS OF STOCK VALUATION AS UNDER: PROGRAMME AS ON 31.3.2002 ADDITIONS W/OFF AS ON 31.3.2003 A. FINISHED 1. CAPTAIN VYOM 6,563,600 .. 6,563,500 100 2. SARASWATI CHANDRA (GUJ) 880,000 ----- 220,000 660,000 3. TDD 1,120,000 -- 1,119,900 100 TOTAL OF (A) 8,563,600 --- 7,903,400 660 ,200 B.IN PROGRESS 1. CHACHA CHOUDHARY 2,471,000 2,017,000 3,838,000 650,000 2. JALWA (PILOT) 550,000 --- 549,900 100 3. PARAJEEV (PILOT) 500,000 --- --- 5 00,000 4. SARASWATI CHANDRA )HINDI 4,400,000 --- 2,200.000 2,200,000 5. C.V.3D 8,060,000 --- 4,030,000 4,030,000 6. COMPUTER GAME 550,000 ---- 549,900 100 7. MAHAVIR 200,000 --- 199,900 100 TOTAL OF (B) 16,731,000 2,017,000 11,367,700 7,380,300 ITA NO. 18/M/2010 5 TOTAL OF (A) +(B) 25,294,600 2,017,000 19,271,100 8,040,500 8. AS CAN BE SEEN FROM THE AFOREMENTIONED CHART, THE A SSESSEE HAS VALUED THE STOCK AS ON 31.3.2003 BUT AT THE SAME TI ME, THE ASSESSEE HAS NOT FURNISHED ANY BASIS FOR TAKING THE VALUATION AS MEN TIONED HEREINABOVE. IN OUR UNDERSTANDING OF THE FACTS, THERE IS NO DENIAL THAT THE ASSESSEE CAN ADOPT THE VALUE OF CLOSING STOCK EITHER AT COST PR ICE OR AT THE NET REALIZABLE VALUE AS PER THE WISHES. IN THE INSTANT CASE, WE F IND THAT THE VALUE OF THE CLOSING STOCK HAS BEEN TAKEN ON THE NET REALIZABLE VALUE AND ACCORDINGLY THE DIFFERENCE BETWEEN THE OPENING STOCK AND THE NE T REALIZABLE VALUE HAS BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATIO N BUT WITHOUT ANY BASIS FOR SUCH WRITE OFF. THE BASIS OF VALUATION HAS TO BE JUSTIFIED WITH DEMONSTRATIVE EVIDENCES WHICH THE ASSESSEE HAS FAIL ED TO BRING ON RECORD MERELY BECAUSE IT HAS DECIDED TO WRITE OFF A PART O F THE OPENING STOCK OR RATHER A SUBSTANTIAL PART OF THE OPENING STOCK OF T HE FILMS/TV SERIALS WOULD NOT JUSTIFY THE CLAIM OF WRITE OFF WITHOUT THERE B EING ANY DEMONSTRATIVE EVIDENCE BROUGHT ON RECORD. THE DECISIONS RELIED U PON BY THE ASSESSEE ARE MISPLACED AS THE ASSESSEE HAS FAILED TO BRING ANY C OGENT MATERIAL EVIDENCE ON RECORD WHICH COULD JUSTIFY THE WRITE OFF OUT OF THE OPENING STOCK, THERE BEING NO SUCH BASIS, WE DO NOT FIND ANY MERIT IN TH E GRIEVANCE OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2014 SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) !' / JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; 3! DATED : 27.10.2014 . . ./ RJ , SR. PS