ACIT, CHENNAI V. Shri B.Suresh, CHENNAI

ITA 1955/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51680 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI HARI OM MARATHA, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 1955/MDS/2010 ASSESSMENT YEAR 2007-08 THE A.C.I.T MEDIA CIRCLE II CHENNAI VS. SHRI B. SURESH NO. 58, PANTHEON ROAD EGMORE, CHENNAI 600 008. (PAN NO. AABPS 5341 P) (APPELLANT) (RESPONDENT) C.O. NO. 172/MDS/10 [A/O I.T.A. NO. 1955/MDS/2010 ASSESSMENT YEAR 2007-08] SHRI B. SURESH VS. THE A.C.I.T NO. 58, PANTHEON ROAD MEDIA CIRCLE II EGMORE, CHENNAI 600 008 CHENNAI (PAN NO. AABPS 5341 P) ASSESSEE BY : SHRI V.S. JAYAKUMAR DEPARTMENT BY : DR. I. VIJAYAKUMAR, CIT, DR PAGE 2 OF 14 I.T.A. NO. 1955/MDS/2010 O R D E R PER N.S. SAINI, A.M :- THIS IS AN APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTION BY THE ASSESSEE, DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-VI, CHENNAI DATED 23.08.2010 FOR ASSESSMENT YEAR 2007-0 8. 2. THE FIRST ISSUE INVOLVED IN THE APPEAL OF THE RE VENUE READS AS UNDER: 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 10,22,955/- BEING THE AMOUNT RECEIVED FROM ADLABS. 2.1 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT ONLY THE SUM OF RS. 1,53,44,626/- REPRESENTS THE AD VANCE AND THE SUM OF RS. 10,22,955/- REPRESENT THE INCOME REC EIVED BY THE ASSESSEE. 2.2 THE LD. CIT(A) ERRED IN ACCEPTING THE CONTENTIO N OF THE ASSESSEE WITHOUT ANY SUPPORTING EVIDENCES. 3. SINCE THE FACTS AND ISSUES INVOLVED IN THESE GRO UNDS ARE INTER CONNECTED, THEY ARE BEING DISPOSED OFF TOGETHER AS UNDER. PAGE 3 OF 14 I.T.A. NO. 1955/MDS/2010 4. THE LD. CIT(A), NARRATING THE FACTS, HAS HELD AS UNDER: FACTS RELATING TO ISSUE NO. 2 ARE THAT AN AMOUNT OF RS.10,22,955/- RECEIVED FROM ADLABS, THE LEARNED AS SESSING OFFICER HAS CONSIDERED THIS AS INCOME ALTHOUGH THIS WAS FOR EXPENSE REIMBURSEMENT. THE APPELLANT PARTNERED WITH ADLABS FOR PRODUCTION OF THE MOVIE KIREEDOM. THE AGR EEMENT WAS FOR SHARING PROFITS AND NOT LOSSES. AS THE MOVI E DID NOT YIELD ANY PROFIT, THE APPELLANT DID NOT DERIVE ANY INCOME. THE AMOUNT SPENT BY THE APPELLANT WAS REIMBURSED BY ADLAB S. THE LEARNED ASSESSING OFFICER WAS OF THE VIEW THAT AS TAX HAS BEEN DEDUCTED, THE AMOUNT RECEIVED BY THE APPELLANT I S INCOME. CIRCULAR NO. 715 DATED AUGUST 8, 1995 REQUIRES TAX TO BE DEDUCTED ON EXPENSE REIMBURSEMENT ALSO AND NOT ONL Y ON INCOME. THIS AMOUNT OF RS. 10,22,955/- WAS ALSO A P ART OF THE AGREED AMOUNT AS PER THE JV AGREEMENT. THE APPELLANT HAS NOT RECEIVED ANY REMUNERATION OR INCOME FROM ADLABS (RELIANCE MEDIA WORKS) AS CONFIRMED VIDE THEIR LETT ER DATED AUGUST 18, 2009. CERTAIN EXPENDITURE INCURRED OVER AND ABOVE THE BUDGETED EXPENDITURE STIPULATED IN THE JOINT VENTUR E PAGE 4 OF 14 I.T.A. NO. 1955/MDS/2010 AGREEMENT BETWEEN ADLABS (RELIANCE MEDIA WORKS) AND THE APPELLANT HAD ALSO BEEN REIMBURSED.' THE ASSESSING OFFICER HAS ADDED A SUM OF RS. 10,22,955/-, RECEIVED FROM ADLABS AND RS. 3,44,326/ - FROM RELIANCE MEDIA WORKS AS THE TDS WAS NOT DEDUCTED. THE AR OF THE APPELLANT PLEADS THAT THESE AMOUNTS WERE RECEIVED FROM ADLABS CONCERNS FOR THE EXPENSES TO BE INCURRED ON BEHALF OF THEM BY THE APPELLANT AND ACCORDINGLY, THIS IS NOT LIABLE FOR T DS DEDUCTION EVEN THOUGH IT IS NOT OFFERED AS INCOME I N HIS RETURN OF INCOME FILED. FURTHER, THEY ARE RELYI NG ON THE BOARD'S CIRCULAR NO.715 DATED AUGUST 8, 1995 AND ALSO THE JURISDICTIONAL TRIBUNAL DECISION IN TH E CASE OF SUPREME RENEWABLE ENERGY LTD., (NOW MERGED WITH SHRI AMBIKA SUGARS LTD.) VS. ITO 31TR 339 (CHENNAI), WHICH IS HELD AS UNDER:- 'TDS -SEC.199 - CREDIT FOR TDS ALLOWABLE EVEN WHERE THE RESPECTIVE INCOME HAD NOT BEEN OFFERED TO TAX - A Y 2003- 04' THE ARGUMENT GIVEN BY THE AR IS FOUND TO BE IN ORDE R PAGE 5 OF 14 I.T.A. NO. 1955/MDS/2010 AND ALSO RESPECTFULLY FOLLOWING THE BOARD'S CIRCULA R AND THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE CITED SUPRA, I AM OF THE OPINION THAT THE AMOUNT RECEIVED FROM ADLABS AND RELIANCE MEDIA WORKS AMOUNTING TO RS.13,67,281/- [10,22,955 + 3,44,326] IS NOT LIABLE FOR TDS DEDUCTION. HENCE THE AO IS DIREC TED TO DELETE THE ADDITION OF RS.13,67,281/- MADE BY HER. THE APPELLANT SUCCEEDS ON THIS GROUND OF APPEAL 5. THE LD. D.R. SUPPORTED THE ORDER OF THE AO WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, ACCORDING TO THE ASSESSING OFFICER, A SSESSEE ENTERED INTO AN AGREEMENT WITH ADLABS FOR PRODUCING A FILM ON BEHALF OF ADLABS. ACCORDING TO THE ASSESSING OFFICER, ASSESS EE RECEIVED TWO PAYMENTS OF RS. 1,53,44,326/- ON 29.5.2006 AND RS. 10,22,955/- ON 11.8.2006 FROM THE SAID ADLABS. IT WAS OBSERVED BY HIM THAT AS PER THE AGREEMENT, ASSESSEE WAS PAID RS. 1,53,44,326/- IN PURSUANCE TO THE LETTER OF ARRANGEMENT WHICH INCLUDED RS. 1, 53,44,326/- AS PAGE 6 OF 14 I.T.A. NO. 1955/MDS/2010 ADVANCE AND RS. 10,22,955/- TOWARDS FIXED PRICE. ASSESSING OFFICER OBSERVED THAT THE FILM WAS NOT COMPLETED DURING THE YEAR AND EXPENSES INCURRED BY THE ASSESSEE FOR PRODUCTION OF A FILM WAS SHOWN AS WORK IN PROGRESS. THE ASSESSING OFFICER, THEREFORE, TREATED RS. 10,22,955/- AS INCOME OF THE ASSESSEE OF THE YEAR UNDER CONSIDERATION AND ADDED THE SAME TO THE INCOM E OF THE ASSESSEE AS BECAUSE ASSESSEE HAS SHOWN ENTIRE RECEI PT OF RS. 1,63,67,281/- AS ADVANCE IN ITS BOOKS OF ACCOUNT. 7. WE FIND THAT THE LD. CIT(A) DELETED THE ADDITION WITHOUT EXAMINING ANY MATERIAL AND ONLY ON THE BASIS OF TH E SUBMISSIONS OF THE ASSESSEE. WE ALSO OBSERVE THAT THE LD. CIT(A) HAS DIRECTED FOR DELETION OF ADDITION OF RS . 13,67,281/- WHEN THE ADDITION MADE BY THE ASSESSIN G OFFICER WAS OF RS. 10,22,955/- ONLY IN RESPECT OF PAYMENT RECEIVED BY THE ASSESSEE FROM ADLABS. CLEARLY, THE ABOVE DIREC TION OF THE LD. CIT(A) IS UNSUSTAINABLE. WE ALSO OBSERVE THAT THE ASSESSING OFFICER HAS ALSO TREATED RS. 10,22,955/- AS INCOME OF THE YEAR OF THE ASSESSEE BY OBSERVING THAT THE SAME HAS BEEN CLASSIFIED AS FIXED PRICE. HOWEVER, THE ASSESSING OFFICER HAS NOT PAGE 7 OF 14 I.T.A. NO. 1955/MDS/2010 DISCUSSED ANYTHING AS TO HOW THE FIXED PRICE IS INC OME OF THE ASSESSEE AND WHETHER OR NOT ASSESSEE WAS REQUIRED T O INCUR ANY EXPENDITURE FOR EARNING THIS FIXED PRICE. WE F IND THAT BOTH THE PARTIES BEFORE US HAVE NOT FILED COPY OF A RRANGEMENT OR AGREEMENT ENTERED INTO BY ASSESSEE WITH THE SAID ADLABS. WE FIND THAT IT IS ALSO THE CONTENTION OF THE ASSES SEE THAT THE AMOUNT RECEIVED FROM ADLABS WAS IN THE NATURE OF REIMBURSEMENT OF EXPENSES ONLY AND AFTER MEETING TH E EXPENSES, EXCESS AMOUNT OF RS. 6 LAKHS RECEIVED FR OM ADLABS WAS RETURNED BACK TO ADLABS ON 8.2.2008. IN THE AB OVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, ALL THE R ELEVANT FACTS RELATING TO THE ISSUE WERE NOT PROPERLY VERIF IED BY THE LOWER AUTHORITIES AND WERE NOT BROUGHT ON RECORD. IN OUR CONSIDERED OPINION, IT SHALL BE FAIR AND JUST TO RE STORE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION OF THE ISSUE AFTER PROPER VERIFICATI ON AND BY PASSING A SPEAKING ORDER AND BY BRINING ALL RELEVAN T MATERIAL ON RECORD. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO TH E ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. WE ACCORDINGL Y SET ASIDE PAGE 8 OF 14 I.T.A. NO. 1955/MDS/2010 THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AS DISCUS SED ABOVE. 9. GROUND NO. 3 IS AS UNDER: 3.1 THE LD. CIT(A) ERRED IN HOLDING THAT THE CREDIT FOR TDS COULD BE GIVEN IN THE CORRESPONDING INCOME WAS NOT A DMITTED BY THE ASSESSEE. 3.2 THE LD. CIT(A) OUGHT TO HAVE APPLIED THE PROVIS IONS OF SECTION 199 WHICH IS UNAMBIGUOUS AND CREDIT FOR TDS C OULD BE GIVEN ONLY IN THE YEAR IN WHICH THE INCOME WAS ASSE SSED. 3.3 THE LD. CIT(A) OUGHT TO HAVE APPLIED THE DECISI ON OF THE CHENNAI TRIBUNAL IN THE CASE OF M/S SHRIRAM EQUIPMENT LEASING, M/S SHRIRAM WHITE GOODS FINANCE, M/S SHRIR AM BUSINESS FINANCE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NOS. 1848/MDS/2009, 1827/MDS/2009 AND 1852/MDS/2009 DATE D 18.2.2010 WHEREIN THE ISSUE OF APPLICABILITY OF SEC TION 199 WAS DECIDED IN FAVOUR OF THE DEPARTMENT. 10. FACTS RELATING TO ISSUE NO.3 AS NARRATED BY THE LD. CIT(A) IN HIS ORDER ARE AS UNDER: PAGE 9 OF 14 I.T.A. NO. 1955/MDS/2010 AN AMOUNT OF RS. 3,44,326/- BEING TDS CLAIM HAS NOT BEEN ALLOWED BY THE LEARNED ASSESSING OFFICER ON THE REA SON THAT THE CORRESPONDING INCOME HAS NOT BEEN ACCOUNTED. AS PER SECTION 199, 'TDS CREDIT SHALL BE GIVEN FOR THE AMO UNT SO DEDUCTED ON PRODUCTION OF THE CERTIFICATE FOR THE AS SESSMENT YEAR IN WHICH THE INCOME IS ASSESSABLE'. TDS CERTIF ICATE IS RELEVANT TO ASSESSMENT YEAR 2007-08 ONLY. THERE IS NO INCOME RECEIVED IN EITHER ASSESSMENT YEAR 2007-08 OR THE S UBSEQUENT ASSESSMENT YEAR 2008-09 WHEN THE MOVIE WAS COMPLETE . THIS HAS BEEN CONFIRMED VIDE ADLABS (RELIANCE MEDIA WORK S) LETTER DATED DECEMBER 14, 2009. TAX HAS BEEN DEDUCTED ON A DVANCE RECEIVED WHICH IS IN LIEU OF REIMBURSEMENT OF EXPENSE S VIDE CIRCULAR NO. 715 DATED AUGUST 8, 1995. THE APPELLANT IS ENTITLED TO CLAIM THE TAX SO DEDUCTED. THIS MOVIE 'K IREEDOM' HAS BEEN CO-PRODUCED BY THE APPELLANT WHEREIN THE PRODUCTION EXPENSES HAVE BEEN REIMBURSED BY ADLABS (RELIANCE MEDIAWORKS). AS PER THE AGREEMENT, THE AP PELLANT WAS ENTITLED TO SHARE THE PROFIT ONLY AND AS THIS P RODUCTION WAS A LOSS, THE APPELLANT DID NOT RECEIVE ANY INCOM E OR SHARE OF PROFIT. PAGE 10 OF 14 I.T.A. NO. 1955/MDS/2010 THE ASSESSING OFFICER HAS ADDED A SUM OF RS.L0,22,955/-, RECEIVED FROM ADLABS AND RS.3,44,326/- FROM RELIANCE MEDIA WORKS AS THE TDS WAS NOT DEDUCTED. THE AR OF THE APPELLANT PLEADS THAT THESE AMOUNTS WERE RECEIVED FROM ADLABS CONCERNS FOR THE EXPENSES TO BE INCURRED ON BEHALF OF THEM BY THE APPELLANT AND ACCORDINGLY, THIS IS NOT LIABLE FOR TDS DEDUCTION EVEN THOUGH IT IS NOT OFFE RED AS INCOME IN HIS RETURN OF INCOME FILED. FURTHER, T HEY ARE RELYING ON THE BOARD'S CIRCULAR NO.715 DATED AUGUST 8, 1995 AND ALSO THE JURISDICTIONAL TRIBUNAL DECISION IN THE CASE OF SUPREME RENEWABLE ENERGY LTD., (NOW MERGED WITH SHRI AMBIKA SUGARS LTD.) VS. ITO 31TR 339 (CHENNAI), WHICH IS HELD AS UNDER:- 'TDS -SEC.199 - CREDIT FOR TDS ALLOWABLE EVEN WHERE THE RESPECTIVE INCOME HAD NOT BEEN OFFERED TO TAX - A Y 2003- 04' THE ARGUMENT GIVEN BY THE AR IS FOUND TO BE IN ORDE R AND ALSO RESPECTFULLY FOLLOWING THE BOARD'S CIRCULA R AND THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE PAGE 11 OF 14 I.T.A. NO. 1955/MDS/2010 CITED SUPRA, I AM OF THE OPINION THAT THE AMOUNT RECEIVED FROM ADLABS AND RELIANCE MEDIA WORKS AMOUNTING TO RS.13,67,281/- [10,22,955 + 3,44,326] IS NOT LIABLE FOR TDS DEDUCTION. HENCE THE AO IS DIREC TED TO DELETE THE ADDITION OF RS.13,67,281/- MADE BY HER. THE APPELLANT SUCCEEDS ON THIS GROUND OF APPEAL 11. THE LD. D.R. SUPPORTED THE ORDER OF THE AO WHER EAS THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, TDS OF RS. 3,44,326/- WAS DEDUCTED B Y ADLABS AGAINST PAYMENT OF RS. 1,53,44,326/- RECEIVED BY THE ASSESS EE. ASSESSEE CLAIMED CREDIT OF THE SAID TDS IN THE YEAR UNDER CO NSIDERATION. THE ASSESSING OFFICER OBSERVED THAT THE SAID AMOUNT WAS SHOWN AS ADVANCE BY THE ASSESSEE AND NO INCOME ASSESSED TO T AX WAS OFFERED IN RESPECT OF THAT RECEIPT DURING THE YEAR UNDER CO NSIDERATION. THE ASSESSING OFFICER ALSO OBSERVED THAT THE FILM WAS C OMPLETED IN THE SUBSEQUENT PREVIOUS YEAR. THEREFORE, THE ASSESSING OFFICER IN VIEW PAGE 12 OF 14 I.T.A. NO. 1955/MDS/2010 OF THE PROVISIONS OF SECTION 199 HELD THAT THE ASSE SSEE WAS NOT ENTITLED OF CREDIT FOR TDS OF RS. 3,44,326/- DURIN G THE YEAR UNDER CONSIDERATION AND CREDIT FOR THE SAID TDS WILL BE G RANTED TO THE ASSESSEE IN THE ASSESSMENT OF THE ASSESSMENT YEAR 2 008-09 AFTER VERIFICATION. 13. WE FIND THAT THIS ISSUE HAS NOT BEEN DECIDED BY THE LD. CIT(A) AGAINST THE REVENUE AND THEREFORE, THE REVENUE HAS NO GRIEVANCE. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 14. IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(A) IS CORRECT. 2. THE LD. CIT(A) HAS GIVEN RELIEF OF RS. 10,22,9 55/- WRONGLY ADDED BY THE ACIT, MEDIA CIRCLE INTEREST INCOME. THIS AMOUNT WAS RECEIVED FROM RELIANCE MEDI A WORKS [ADLABS], TOWARDS EXPENSES REIMBURSEMENT FOR THE MOVIE KIREEDOM. THE AGREEMENT WITH RELIANCE MEDIA WORKS AND THE CONFIRMATION RECEIVED FROM THEM PAGE 13 OF 14 I.T.A. NO. 1955/MDS/2010 THAT THEY WERE PROVIDED AS EVIDENCE TO ACIT AND LD. CIT(A) SUBSTANTIATE THE FACT THAT EH AMOUNT WAS RECEIVED ONLY AS EXPENSE REIMBURSEMENT. THE RESPONDENT HAS NOT RECEIVED ANY REMUNERATION OR INCOME FROM RELIANCE MEDIA WORKS AS THE MOVIE WAS A LOSS. CIRCULAR NO. 715 DATED AUGUST 8, 1995 REQUIRES T AX TO BE DEDUCTED ON EXPENSE REIMBURSEMENT ALSO AND NOT ONLY ON INCOME. HENCE THIS AMOUNT CANNOT BE CONSTRUE D AS INCOME EVEN THOUGH TDS HAS BEEN DEDUCTED. 3. THE LD. CIT(A) HAS ALLOWED THE TDS CLAIM OF RS.3,44,326/. THE TRIBUNAL DECISION IN THE CASE OF SUPREME RENEWABLE ENERGY LTD., VS. ITO 31TR 339 (CHENNAI), THAT 'TDS -SEC.199 - CREDIT FOR TDS ALLOWABLE EVEN WHERE THE RESPECTIVE INCOME HAD NOT BEEN OFFERED TO TAX' SUPPORTS THE ABOVE CLAIM. THE RESPONDENT HAS NOT RECEIVED ANY INCOME/REMUNERATION AND THE TDS HAS BEEN DEDUCTED ONLY ON THE ADVANCE MONEY GIVEN FOR MEETING EXPENSES. THIS IS EVIDENCED BY THE PAGE 14 OF 14 I.T.A. NO. 1955/MDS/2010 AGREEMENT AND CONFIRMATION LETTER FROM RELIANCE MEDIA WORKS. TDS IS RELATED TO ASSESSMENT YEAR 2007-08 ONLY AND THE RESPONDENT CAN CLAIM IT IN THE YEAR IT IS DEDUCTED. 15. WE FIND THAT IN THE CROSS OBJECTION FILED BY TH E ASSESSEE THAT NO OBJECTION WAS RAISED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A). THE SAME WAS FILED MERELY TO SUPPORT THE O RDER OF THE LD. CIT(A). WE, THEREFORE, DISMISS THIS CROSS OBJECTIO N AS HAVING BECOME INFRUCTUOUS. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTIO N IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 5 TH AUGUST, 2011. SD/- SD/- ((HARI OM MARATHA ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH AUGUST, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FIL E