M/s Vaishno Academy, Hyderabad V. ACIT, Hyderabad

ITA 248/HYD/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59165 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Keywords: Search and seizure; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.248/HYD/2008 (ASSESSMENT YEAR 2004-05) M/S. VAISHNO ACADEMY, HYDERABAD (PAN - AFDFV 4995 N ) V/S ASST. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 4, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.SRINIVAS RESPONDENT BY : SHRI B.V.PRASAD REDDY DATE OF HEARING 9. 1.2012 DATE OF PRONOUNCEMENT 20.1.2012 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A)-I, HYDERABAD DATED 12.12.2007 FOR THE AS SESSMENT YEAR 2004-05. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ADDITION OF RS.22 LAKHS MADE BY DISBELIEVING THE AS SESSEES CLAIM WITH REGARD TO PURCHASE OF PERPETUAL RIGHTS IN A FILM. 3. FACTS OF THE ASSESSEE IN BRIEF ARE THAT THE ASS ESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS IN FILM PRODU CTION. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE PREMISES OF THE MANAGING PARTNER OF THE ASSESSEE-FIRM, SHRI P.JAGANNATH, ON 2.1.2004. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOU ND THAT THE ASSESSEE HAS MADE A PAYMENT OF RS.22 LAKHS TO M/S. MYTHRI TALKIES FOR PURCHASE OF PERPETUAL RIGHTS OVER THE FILM ORI NEE PREMA BANGARAM KANU . HOWEVER, NO REMAKING OF THE SAID FILM IN ANY OTH ER LANGUAGE WAS TAKEN UP BY THE ASSESSEE. THE ASSESSING OFFI CER OBSERVED THAT ITA NO.248/HYD/2008 M/S. VAISHNO ACADEMY, HYDERABAD 2 THE ASSESSEE PAID THE SAID AMOUNT OF RS.22 LAKHS ON LY TO NEUTRALIZE THE RECEIPT OF AN AMOUNT OF RS. 15 LAKHS BY WAY OF SALE CONSIDERATION FOR FILM IDIOT BY THE ASSESSEE. THE ASSESSING OFFICER DID NOT AC CEPT THE CLAIM OF THE ASSESSEE THAT REMAKING PROJECT IN RES PECT OF FILM ORI NEE PREMA BANGARAM KANU WAS GIVEN UP FOR BONA FIDE REASONS AND ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE WI TH REGARD TO EXPENDITURE OF RS.22 LAKHS FOR THE PURCHASE OF THE SAID FILM, WHILE MAKING THE ASSESSMENT UNDER S.143(3) READ WITH S.1 53C AND S.153A OF THE ACT, VIDE ORDER DATED 14.3.2006. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE REMAKING OF THE REMAKING OF THE FILM ORI NEE PREMA BANGARAM KANU IN OTHER LANGUAGES WAS NOT TAKEN UP AS THE FILM WAS AN UTTER FLOP IN TELUGU, AND AS SUCH, IT W OULD NOT HAVE BEEN COMMERCIALLY VIABLE TO REMAKE IT IN OTHER LANGUAGE. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE MADE ELABORATE SUBMI SSIONS BEFORE THE CIT(A), CRUX OF WHICH IS AS FOLLOWS- (A) THE ASSESSEE FIRM HAS BEEN IN THE FIELD OF FILMS FO R MANY YEARS AND OUT OF COMMERCIAL EXPEDIENCY, IT WAS FELT THAT ONCE THE MOVIE HAS BEEN DECLARED FLOP IN THE FILM T RADE CIRCLES, IT WOULD BE FOOLISH UPON THE ASSESSEE TO S PEND MORE MONEY AND REMAKE IT IN OTHER LANGUAGES. (B) THE AUTHORISED REPRESENTATIVE RELIED ON THE DECISIO N OF THE HONBLE SUPREME COURT SATYANARAYANA RICE MILL CONTRACTORS CO. V/S. CIT (223 ITR 101, 106; AND OF THE HONBLE KARNATAKA HIGH COURT IN MOTOR INDUSTRIES CO . LTD. (223 ITR 112)-KAR.; AND OF THE RAJASTHAN HIGH COURT IN JAIPUR ELECTRO (223 ITR 535)-RAJ. FOR THE PROPOSITI ON THAT A BUSINESS MAN IS THE BEST JUDGE OF THE SITUATION AND ITA NO.248/HYD/2008 M/S. VAISHNO ACADEMY, HYDERABAD 3 THEREFORE, ABANDONING OF THE PICTURE TO BE REMADE IN OTHER LANGUAGES IS TO BE LEFT PURELY TO THE DECISION OF T HE ASSESSEE. (C) THE DECISION IN THE CASE OF THE HONBLE MADRAS HIGH COURT B.NAGIREDDY V/S. CIT (199 ITR 1(AT PAGE 451 AND 463 ) IS DIRECTLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. THE ASSESSING OFFICER IN THIS CASE HAS MERELY PRESUMED THAT IT IS A COLOURABLE DEVICE FOR AVOIDING TAXES, WHICH I S ERRONEOUS. THE CIT(A) AFTER HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE, HELD THAT THE ASSESSEE HAD PURCHASED RE-MAKING RIGH TS IN NOVEMBER, 2003, MORE THAN FOUR MONTHS AFTER THE ISSUE OF CEN SOR CERTIFICATE IN JUNE, 2003. HE, THEREFORE, OBSERVED THAT THE ASSESS EE WAS AWARE THAT THE FILM MAY NOT HAVE MUCH OF COMMERCIAL VALUE IF D UBBED IN OTHER LANGUAGES. ACCORDINGLY, THE CIT(A) HELD THAT IT WA S A DELIBERATE ATTEMPT ON THE PART OF THE ASSESSEE TO INCUR EXPEND ITURE, SO AS TO NEUTRALIZE THE AMOUNT RECEIVED IN RESPECT OF MOVIE IDIOT AND THEREBY REDUCE THE TAXABLE INCOME. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. WE HEARD BOTH THE PARTIES. WE FIND THAT IT IS A FACT THAT THE PAYMENTS HAVE BEEN MADE BY CHEQUES FOR THE PURC HASE OF THE FILM AND THE SAME HAVE BEEN ENCASHED BY THE PURCHASER, W HO IS IN NO WAY RELATED TO THE ASSESSEE. THE TRANSACTION HAS BEEN ENTERED INTO IN THE MIDDLE OF THE YEAR, AND THE DEPARTMENT HAS NOT BROU GHT OUT ANY MATERIAL TO PROVE THAT IT IS A COLOURABLE DEVICE. HAD IT BEEN A COLOURABLE DEVICE TO AVOID TAXES, THE TRANSACTION WOULD HAVE BEEN ENTERED INTO IN THE LAST PART OF THE YEAR. THOUGH THE FACT THAT THE ITA NO.248/HYD/2008 M/S. VAISHNO ACADEMY, HYDERABAD 4 CENSOR BOARD HAS NOT ISSUED CERTIFICATE MEANS THAT THE COMMERCIAL VALUE WOULD BE AFFECTED, THE LEARNED COUNSEL FOR T HE ASSESSEE POINTED OUT, THE DECISION OF THE CENSOR BOARD WOULD NOT BE CONCLUSIVE WITH RESPECT TO THE ISSUE OF CERTIFICATE, AND AS HELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MOTOR INDUST RIES CO. LTD. (SUPRA), COMMERCIAL EXPEDIENCY OF A BUSINESS MANS DECISION TO INCUR EXPENDITURE CANNOT BE TESTED ON THE TOUCH STONE OF STRICT LEGAL LIABILITY TO INCUR EXPENDITURE. THE DOCTRINE THAT BUSINESSMA N IS THE BEST JUDGE OF THE SITUATION HAS TO BE ACCEPTED. THEREFORE, TH E EXPENDITURE OF RS.22 LAKHS CLAIMED ON REMAKING PROJECT WAS PRESUME D TO BE FOR BONA FIDE REASONS. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM FO THE ASSESSEE WITH REGARD TO THE EXPENDITURE OF RS.22 LA KHS. CONSEQUENTLY, ASSESSEES GROUNDS IN THIS APPEAL ARE ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 20.1.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 20TH JANUARY, 2012 COPY FORWARDED TO: 1. M/S. VAISHNO ACADEMY, FLAT NO.101, VISHNU MEADOWS, AVENUE NO.7, ROAD NO.3, BANJARA HILLS HYDERABAD 2. ASST COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 4 , HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) I, HYDERABAD 4. COMMISSIONER OF INCOME - TAX CENTRAL HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE , ITAT, HYDERABAD B.V.S.