DHARMA PRODUCTION P.LTD, MUMBAI V. DCIT CEN CIR 31, MUMBAI

ITA 2483/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100976 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Keywords: Depreciation; Business expenditure; Cost of acquisition; Commercial expediency; Unabsorbed depreciation
• Section: 37(1); 12; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 2 483/ MUM/20 1 3 ( / ASSESSMENT YEA R : 20 09 - 10 ) DHARMA PRODUCT IONS PVT.LTD., 29, JAINS ARCADE, 2 ND FLOOR, 14 TH ROAD KHAR (W), MUMBAI - 400037 / VS. ASSTT.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 31 , AYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACD3889K / APPELLANT S BY SHRI V IJAY MEHTA / R EVENUE BY SHRI KAILASH GAIKWAD / DATE OF HEARING : 0 3 .9 . 201 5 / DATE OF PRON OUNCEMENT: 9 . 9. 201 5 / O R D E R P ER B R BASKARAN, AM : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10 - 01 - 2013 PASSED BY LD CIT(A) - 40, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN RESPECT OF FOLLOWING ISSUES: - ( A ) DISALLOWANCE OF ADVERTISEMENT EXPENSES. ( B ) DISALLOWANCE ON AD - HOC BASIS FROM OUT OF VARIOUS EXPENSES. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HINDI FILM PRODUCTION AND DISTRIBUTION OF FILMS . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PRODUCED A FILM NAMED DOSTANA AND SOLD THE DISTRIBUTION RIGHTS TO M/S ITA NO. 2483 / MUM/20 1 3 2 YASHRAJ FILMS P LTD. THE ASSESSEE GOT THE CERTIFICATE FROM CENSOR BOARD ON 03 - 11 - 2008 AND THE FILM WAS RELEASED ON 14.11.2008. TH E ASSESSEE INCURRED ADVERTISEMENT EXPENDITURE OF RS.4,44,49,789/ - AND CLAIMED THE SAME AS DEDUCTION. THE AO NOTICED THAT THE ASSESSEE HAS INCURRED THE ADVERTISEMENT EXPENDITURE AFTER THE ISSUE OF CERTIFICATE BY THE CENSOR BOARD. THE AO TOOK THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM ADVERTISEMENT EXPENDITURE AS DEDUCTION IN VIEW OF THE PROVISIONS OF RULE 9A AND 9B OF I.T RULES, SINCE IT HAS BEEN INCURRED AFTER ISSUING OF CERTIFICATE BY CENSOR BOARD. ACCORDINGLY HE DISALLOWED THE CLAIM OF ADVERTI SEMENT EXPENSES AND THE SAME WAS ALSO CONFIRMED BY LD CIT(A). 3. WE HEARD THE PARTIES ON THIS ISSUE. SINCE, THE DISPUTE REVOLVES AROUND THE PROVISIONS OF RULE 9A AND RULE 9B, WE FEEL IT PERTINENT TO EXTRACT THE RELEVANT PROVISIONS BELOW: - 9A. [(1) IN COMPUTING THE PROFITS AND GAINS OF THE BUSINESS OF PRODUCTION OF FEATURE FILMS CARRIED ON BY A PERSON (THE PERSON CARRYING ON SUCH BUSINESS HEREAFTER IN THIS RULE REFERRED TO AS FILM PRODUCER), THE DEDUCTION IN RESPECT OF THE COST OF PRODUCTION OF A FEATU RE FILM CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS IN A PREVIOUS YEAR SHALL BE ALLOWED IN ACCORDANCE WITH THE PROVISIONS OF SUB - RULE (2) TO SUB - RULE (4). EXPLANATION : IN THIS RULE, ( I ) BOARD OF FILM CENSORS MEANS THE BOARD OF FILM CENSORS CONS TITUTED UNDER THE CINEMATOGRAPH ACT, 1952 (37 OF 1952); ( II ) COST OF PRODUCTION, IN RELATION TO A FEATURE FILM, MEANS THE EXPENDITURE INCURRED ON THE PRODUCTION OF THE FILM, NOT BEING ( A ) THE EXPENDITURE INCURRED FOR THE PREPARATION OF THE POSITIV E PRINTS OF THE FILM; AND ( B ) THE EXPENDITURE INCURRED IN CONNECTION WITH THE ADVERTISEMENT OF THE FILM AFTER IT IS CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS:] [ PROVIDED THAT THE COST OF PRODUCTION OF A FEATURE FILM, SHALL BE REDUCED BY THE SU BSIDY RECEIVED BY THE FILM PRODUCER UNDER ANY SCHEME FRAMED BY THE GOVERNMENT, WHERE SUCH AMOUNT OF SUBSIDY HAS NOT BEEN INCLUDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR ANY ASSESSMENT YEAR.] ITA NO. 2483 / MUM/20 1 3 3 (2) WHERE A [***] FEATURE FILM IS CERTIFIED FOR RELEA SE BY THE BOARD OF FILM CENSORS IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR, ( A ) THE FILM PRODUCER SELLS ALL RIGHTS OF EXHIBITION OF THE FILM, THE ENTIRE COST OF PRODUCTION OF THE FILM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; OR ( B ) THE FILM PRODUCER ( I ) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR ( II ) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF SOME OF THE AREAS; OR ( III ) HIMSELF EXHIBITS TH E FILM ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS RELEASED FOR EXHIBITION ON A COMMERCIAL BASIS AT LEAST [NINETY] DAYS BEFORE THE END OF SUCH PRE VIOUS YEAR, THE ENTIRE COST OF PRODUCTION OF THE FILM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR. (3) WHERE A [***] FEATURE FILM IS CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS IN ANY PREVIOUS YEAR AND I N SUCH PREVIOUS YEAR, THE FILM PRODUCER ( A ) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR ( B ) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF SOME OF THE AREAS; OR ( C ) HIMSELF EXHIBITS THE FILM ON A COMME RCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS NOT RELEASED FOR EXHIBITION ON A COMMERCIAL BASIS AT LEAST [NINETY] DAYS BEFORE THE END OF SUCH PREVIOUS YEAR, T HE COST OF PRODUCTION OF THE FILM IN SO FAR AS IT DOES NOT EXCEED THE AMOUNT REALISED BY THE FILM PRODUCER BY EXHIBITING THE FILM ON A COMMERCIAL BASIS OR THE AMOUNT FOR WHICH THE RIGHTS OF EXHIBITION ARE SOLD OR, AS THE CASE MAY BE, THE AGGREGATE OF THE A MOUNTS REALISED BY THE FILM PRODUCER BY EXHIBITING THE FILM AND BY THE SALE OF THE RIGHTS OF EXHIBITION, SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; AND THE BALANCE, IF ANY, SHALL BE CARRIED FORWARD TO THE NEXT FOLLOWING PREVIOUS YEAR AND ALLOWED AS A DEDUCTION IN THAT YEAR. (4) WHERE, DURING THE PREVIOUS YEAR IN WHICH A [***] FEATURE FILM IS CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS, THE FILM PRODUCER DOES NOT HIMSELF EXHIBIT THE FILM ON A COMMERCIAL BASIS OR DOES NOT SELL THE RIGHTS OF EXHIBITION OF THE FILM, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ITA NO. 2483 / MUM/20 1 3 4 THE COST OF PRODUCTION OF THE FILM IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; AND THE ENTIRE COST OF PRODUCTION OF THE FILM SHALL BE CAR RIED FORWARD TO THE NEXT FOLLOWING PREVIOUS YEAR AND ALLOWED AS A DEDUCTION IN THAT YEAR. [(5)] NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS RULE, THE DEDUCTION UNDER THIS RULE SHALL NOT BE ALLOWED UNLESS, ( A ) IN A CASE WHERE T HE FILM PRODUCER ( I ) HAS HIMSELF EXHIBITED THE FEATURE FILM ON A COMMERCIAL BASIS; OR ( II ) HAS SOLD THE RIGHTS OF EXHIBITION OF THE FEATURE FILM; OR [( III ) HAS HIMSELF EXHIBITED THE FEATURE FILM ON A COMMERCIAL BASIS IN SOME AREAS AND HAS SOLD TH E RIGHTS OF EXHIBITION OF THE FEATURE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS,] THE AMOUNT REALISED BY EXHIBITING THE FILM, OR THE AMOUNT FOR WHICH THE RIGHTS OF EXHIBITION HAVE BEEN SOLD OR, AS THE CASE MAY BE, THE AGGREGATE OF SUCH AMO UNTS, IS CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM IN RESPECT OF THE YEAR IN WHICH THE DEDUCTION IS ADMISSIBLE; ( B ) IN A CASE WHERE THE FILM PRODUCER HAS TRANSFERRED THE RIGHTS OF EXHIBITION OF THE FEATURE FILM ON A MINIMUM GUARANTEE BASIS, THE MINIMUM AMOUNT GUARANTEED AND THE AMOUNT, IF ANY, RECEIVED OR DUE IN EXCESS OF THE GUARANTEED AMOUNT OR WHERE THE FILM PRODUCER FOLLOWS CASH SYSTEM OF ACCOUNTING, THE AMOUNT RECEIVED TOWARDS THE MINIMUM GUARANTEE AND THE AMOUNT, IF ANY, RECEIVED IN EXCESS OF THE GUARANTEED AMOUNT, ARE CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM IN RESPECT OF THE YEAR IN WHICH THE DEDUCTION IS ADMISSIBLE. [(6)] WHERE THE [ASSESSING OFFICER] IS OF OPINION THAT [( A )] THE RIGHTS OF EXHIBITION OF THE FEATURE FILM HA VE BEEN TRANSFERRED BY THE FILM PRODUCER BY A MODE NOT COVERED BY THE PROVISIONS OF THIS RULE; OR [( B )] HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF ANY CASE, IT IS NOT PRACTICABLE TO APPLY THE PROVISIONS OF THIS RULE TO SUCH CASE, ITA NO. 2483 / MUM/20 1 3 5 DEDUCTION IN RESP ECT OF THE COST OF PRODUCTION OF THE FILM MAY BE ALLOWED BY THE [ASSESSING OFFICER] IN SUCH OTHER MANNER AS HE MAY DEEM SUITABLE. [(7)] FOR THE PURPOSES OF THIS RULE, ( I ) THE SALE OF THE RIGHTS OF EXHIBITION OF A FEATURE FILM INCLUDES THE LEASE OF SUCH RIGHTS OR THEIR TRANSFER ON A MINIMUM GUARANTEE BASIS; ( II ) THE RIGHTS OF EXHIBITION OF A FEATURE FILM SHALL BE DEEMED TO HAVE BEEN SOLD ONLY ON THE DATE WHEN THE POSITIVE PRINTS OF THE FILM ARE DELIVERED BY THE FILM PRODUCER TO THE PURCHASER OF SUCH R IGHTS OR WHERE IN TERMS OF THE AGREEMENT BETWEEN THE FILM PRODUCER AND THE FILM DISTRIBUTOR AS DEFINED IN RULE 9B, THE POSITIVE PRINTS ARE TO BE MADE BY THE FILM DISTRIBUTOR, THE DATE ON WHICH THE NEGATIVE OF THE FILM IS DELIVERED BY THE FILM PRODUCER TO T HE FILM DISTRIBUTOR. [(8)] [NOTHING CONTAINED IN THIS RULE SHALL APPLY IN RELATION TO ANY ASSESSMENT YEAR COMMENCING BEFORE THE 1ST DAY OF APRIL, 1987.] [***] 9B. (1) IN COMPUTING THE PROFITS AND GAINS OF THE BUSINESS OF DISTRIBUTION OF FEATURE FILMS CARRIED ON BY A PERSON (THE PERSON CARRYING ON SUCH BUSINESS HEREAFTER IN THIS RULE REFERRED TO AS FILM DISTRIBUTOR), THE DEDUCTION IN RESPECT OF THE COST OF ACQUISITION OF A FEATURE FILM SHALL BE ALLOWED IN ACCORDANCE WITH SUB - RULE (2) TO SUB - RULE (4). E XPLANATION : FOR THE PURPOSES OF THIS RULE, COST OF ACQUISITION, IN RELATION TO A FEATURE FILM, MEANS THE AMOUNT PAID [BY THE FILM DISTRIBUTOR TO THE FILM PRODUCER OR TO ANOTHER DISTRIBUTOR UNDER AN AGREEMENT ENTERED INTO BY THE FILM DISTRIBUTOR WITH SUC H FILM PRODUCER OR SUCH OTHER DISTRIBUTOR, AS THE CASE MAY BE] FOR ACQUIRING THE RIGHTS OF EXHIBITION AND, WHERE THE RIGHTS OF EXHIBITION HAVE BEEN ACQUIRED ON A MINIMUM GUARANTEE BASIS, THE MINIMUM AMOUNT GUARANTEED, NOT BEING ( I ) THE AMOUNT OF EXPENDI TURE INCURRED BY THE FILM DISTRIBUTOR FOR THE PREPARATION OF THE POSITIVE PRINTS OF THE FILM; AND ( II ) THE EXPENDITURE INCURRED BY HIM IN CONNECTION WITH THE ADVERTISEMENT OF THE FILM. (2) WHERE A FEATURE FILM IS ACQUIRED BY THE FILM DISTRIBUTOR IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR ( A ) THE FILM DISTRIBUTOR SELLS ALL RIGHTS OF EXHIBITION OF THE FILM, THE ITA NO. 2483 / MUM/20 1 3 6 ENTIRE COST OF ACQUISITION OF THE FILM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; OR ( B ) THE FILM DISTRIBUTOR, ( I ) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR ( II ) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF SOME OF THE AREAS; OR ( III ) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS I N CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS RELEASED FOR EXHIBITION ON A COMMERCIAL BASIS AT LEAST [NINETY] DAYS BEFORE THE END OF SUCH PREVIOUS YEAR, THE ENTIRE COST OF ACQUISITION OF THE FILM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR. (3) WHERE A FEATURE FILM IS ACQUIRED BY THE FILM DISTRIBUTOR IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR THE FILM DISTRIBUTOR ( A ) HIMSE LF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR ( B ) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF SOME OF THE AREAS; OR ( C ) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS NOT RELEASED FOR EXHIBITION ON A COMMERCIAL BASIS AT LEAST [NINETY] DAYS BEFORE THE END OF SUCH PREVIOUS YEAR, THE COST OF ACQUISITION OF THE FILM IN SO FAR AS IT D OES NOT EXCEED THE AMOUNT REALISED BY THE FILM DISTRIBUTOR BY EXHIBITING THE FILM ON A COMMERCIAL BASIS OR THE AMOUNT FOR WHICH THE RIGHTS OF EXHIBITION HAVE BEEN SOLD OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS REALISED BY THE FILM DISTRIBUTOR BY EXHIBITING THE FILM AND BY THE SALE OF THE RIGHTS OF EXHIBITION, SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; AND THE BALANCE, IF ANY, SHALL BE CARRIED FORWARD TO THE NEXT FOLLOWING PREVIOUS YEAR AND ALLOWED AS A DEDUCTION IN THAT YEAR. (4) WHERE DURING THE PREVIOUS YEAR IN WHICH A FEATURE FILM IS ACQUIRED BY THE FILM DISTRIBUTOR, HE DOES NOT HIMSELF EXHIBIT THE FILM ON A COMMERCIAL BASIS OR DOES NOT SELL THE RIGHTS OF EXHIBITION OF THE FILM, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THE COST OF ACQUISITION OF THE FILM IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; AND THE ENTIRE COST OF ACQUISITION SHALL BE CARRIED ITA NO. 2483 / MUM/20 1 3 7 FORWARD TO THE NEXT FOLLOWING PREVIOUS YEAR AND ALLOWED AS A DEDUCTION IN THAT YEAR. (5) NOTWITHSTANDING ANYTHING CONTAINED IN THE FOREGOING PROVISIONS OF THIS RULE, THE DEDUCTION UNDER THIS RULE SHALL NOT BE ALLOWED UNLESS ( A ) IN A CASE WHERE THE FILM DISTRIBUTOR, ( I ) HAS HIMSELF EXHIBITED THE FEATURE FILM ON A COMMERCIAL BASIS; O R ( II ) HAS SOLD THE RIGHTS OF EXHIBITION OF THE FEATURE FILM; OR ( III ) HAS HIMSELF EXHIBITED THE FEATURE FILM ON A COMMERCIAL BASIS IN SOME AREAS AND HAS SOLD THE RIGHTS OF EXHIBITION OF THE FEATURE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING ARE AS, THE AMOUNT REALISED BY EXHIBITING THE FILM, OR THE AMOUNT FOR WHICH THE RIGHTS OF EXHIBITION HAVE BEEN SOLD, OR, AS THE CASE MAY BE, THE AGGREGATE OF SUCH AMOUNTS, IS CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM IN RESPECT OF THE YEAR IN WHI CH THE DEDUCTION IS ADMISSIBLE ; ( B ) IN A CASE WHERE THE FILM DISTRIBUTOR HAS TRANSFERRED THE RIGHTS OF EXHIBITION OF THE FEATURE FILM ON A MINIMUM GUARANTEE BASIS, THE MINIMUM AMOUNT GUARANTEED AND THE AMOUNT, IF ANY, RECEIVED OR DUE IN EXCESS OF THE G UARANTEED AMOUNT, OR WHERE THE FILM DISTRIBUTOR FOLLOWS CASH SYSTEM OF ACCOUNTING, THE AMOUNT RECEIVED TOWARDS THE MINIMUM GUARANTEE AND THE AMOUNT, IF ANY, RECEIVED IN EXCESS OF THE GUARANTEED AMOUNT, ARE CREDITED IN THE BOOKS OF ACCOUNT MAINTAINED BY HIM IN RESPECT OF THE YEAR IN WHICH THE DEDUCTION IS ADMISSIBLE. (6) FOR THE PURPOSES OF THIS RULE, ( I ) THE SALE OF THE RIGHTS OF EXHIBITION OF A FEATURE FILM INCLUDES THE LEASE OF SUCH RIGHTS OR THEIR TRANSFER ON A MINIMUM GUARANTEE BASIS ; ( II ) THE R IGHTS OF EXHIBITION OF A FEATURE FILM SHALL BE DEEMED TO HAVE BEEN SOLD ONLY ON THE DATE WHEN THE POSITIVE PRINTS OF THE FILM ARE DELIVERED BY THE FILM DISTRIBUTOR TO THE PURCHASER OF SUCH RIGHTS ; [( III ) DISTRIBUTOR SHALL INCLUDE A SUB - DISTRIBUTOR.] [(7) NOTHING CONTAINED IN THIS RULE SHALL APPLY IN RELATION TO ANY ASSESSMENT YEAR COMMENCING BEFORE THE 1ST DAY OF APRIL, 1987.] [CONDITIONS FOR CARRYING FORWARD OR SET - OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWANCE IN CASE OF AMALGAMATION ITA NO. 2483 / MUM/20 1 3 8 THE REVENUES VIEW IS THAT THE ABOVE SAID RULES PROHIBIT CLAIMING EXPENDITURE INCURRED AFTER THE ISSUING OF CERTIFICATE BY THE CENSOR BOARD. 4. AT THE TIME OF HEARING, THE LD A.R SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE CO - ORDINATE BEN CH OF TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.2480 & 4791/MUM/2013 DATED 18 TH SEPTEMBER, 2013 RELATING TO AY 2006 - 07 AND IT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION RENDERED BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. PRASAD PRODUCTIONS PVT LTD (179 ITR 147) AND ALSO THE DECISION RENDERED BY THE MUMBAI BENCH OF TRIBUNAL IN THE CASE OF MUKTA ARTS PVT LTD VS. ACIT (292 ITR (AT) 16). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSE D BY THE TRIBUNAL IN THE ASSESSEES OWN CASE: - 26. WE HAVE CONS I DERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD . THERE IS NO DISPUTE ABOUT THE DATE OF RELEASE OF THE FILM IN QUESTION ON 29 . 4.2005. WE FURTHER NOTE THAT THE CENSOR BOARD O F FILMS ISSUED THE CERTIFICATION OF THE FILM ON 21 . 4.2005 THEREFORE , THE FILM WAS RELEASED FOR EXHIBITION ON COMMERCIAL BASIS AT THE BEG I NNING OF THE PREVIOUS YEAR AND AS PER RULE 9A OF THE INCOME TAX RULE THE ENTIRE COST O F PRODUCTION IS ALLOWABLE DEDUCTI ON. THE CIT(A) HAS ENHANCED THE DISALLOWANCE BY INVOKING RULE 9A IN RESPECT OF THE AMOUNT OF RS. 41 , 43,240/ - ON ACCOUNT OF POSITIVE FILMS AND A SUM OF RS. 2,26,30 , 328/ - ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY . THE REASON FOR DISALLOWANCE BY THE CIT(A) IS T HAT THE ADVERTISEMENT/PUBL I CITY EXPENDITURE IS NOT PART OF THE COST OF PRODUCTION THEREFORE , IS NOT ALLOWABLE AS PER RULE 9A . THE DECISION RELIED UPON BY THE CIT(A) ARE ONLY IN RESPECT OF THE DISALLOWANCE OF EXPENDITURE UNDER RULE 9A OR 98 WHEREAS THE EXPE NDITURE WHICH DO NOT FORM PART OF THE COST OF PRODUCTION CANNOT BE DISALLOWED BY INVOKING RULE 9A AND THEREFORE , THE SAME IS ALLOWABLE U/S 37 OF THE INCOME TAX ACT AS HELD BY THE HON'BLE MADRAS HIGH COURT IN CASE OF CIT VS PRASAD PRODUCTION PVT . LTD.(SUPRA ) AT PAGE NO . 156 AND 157 AS UNDER : ITA NO. 2483 / MUM/20 1 3 9 ONLY DURING THE COURSE OF THE PENDENCY OF THE APPEAL BEFORE THE A PPELLATE ASSISTANT COMMISSIONER, THE ASSESSEE EXERCISED AN OPTION AS PER RULE 9A OF THE RULES AND U NDER EXPLANATION ( II )( A ) TO RULE 9A(1), THE EXPEND ITURE INCURRED FOR THE PREPARATION OF THE POSITIVE PRINTS OF THE FILM COULD NOT BE INCLUDED WITHIN THE EXPRESSION 'COST OF PRODUCTION'. IT IS FOR THIS REASON THAT SUCH EXPENDITURE IS CHARACTERISED AS POST - PRODUCTION EXPENDITURE. ORDINARILY, ALL EXPENDITURE INCURRED ON THE PRODUCTION OF A FILM WOULD BE ITS COST OF PRODUCTION, BUT THAT WOULD EXCLUDE THE EXPENDITURE INCURRED FOR THE PREPARATION OF THE POSITIVE PRINTS OF THE FILM SO PRODUCED. THE PURPOSE OF OBTAINING POSITIVE PRINTS IS TO EXHIBIT THE FILM PRODU CED, WHICH IS A STAGE AFTER THE COMPLETION OF THE PRODUCTION. IN ANY GIVEN CASE A PERSON CARRYING ON BUSINESS IN THE PRODUCTION OF FEATURE FILM MAY PRODUCE A FILM, BUT FOR A VARIETY OF REASONS, HE MAY NOT BE IN A POSITION TO EXHIBIT IT BY OBTAINING POSITIV E PRINTS. HAVING PRODUCED A FILM, THE PERSON CARRYING ON BUSINESS OF PRODUCTION OF FEATURE FILMS MAY EITHER KEEP THEM WITHOUT EXHIBITION OR EVEN PART WITH IT WITHOUT MAKING ARRANGEMENTS FOR THEIR EXHIBITION. IT CANNOT, THEREFORE, BE ASSUMED THAT IN ALL C ASES OF PRODUCTION OF A FILM, THE PRODUCER MUST NECESSARILY OBTAIN THE POSITIVE PRINTS OF THE FILM AS WELL. IN OTHER WORDS, IF A PERSON CARRIES ON BUSINESS OF PRODUCTION OF FILMS, HE MAY NOT ONLY PRODUCE THE FILM AND ALSO PREPARE THE POSITIVE PRINTS FOR TH E PURPOSE OF EXHIBITION OR HE MAY NOT TAKE STEPS FOR THE EXHIBITION OF THE FILM HAVING PRODUCED IT. THE PRODUCTION AND EXHIBITION OF A FEATURE FILM CONSTITUTE TWO DISTINCT AND SEPARATE STAGES AND WHILE THE FORMER WOULD TAKE IN ALL ACTIVITIES WHICH CULMINAT E IN THE PRODUCTION OF A FEATURE FILM, THE LATTER CONTEMPLATES A STAGE SUBSEQUENT TO THE COMPLETION OF THE PRODUCTION OF THE FILM, VIZ., EXHIBITION OF THE FILM PRODUCED. VIEWED THUS, ANY EXPENDITURE INCURRED IN CONNECTION WITH THE PREPARATION OF THE POSITI VE PRINTS FOR PURPOSES OF EXHIBITION WOULD REALLY BE POST - PRODUCTION EXPENSES AND ALSO AN ITEM OF EXPENDITURE IN RELATION TO THE BUSINESS OF PRODUCTION AND EXHIBITION OF FEATURE FILMS AND WOULD, THEREFORE, QUALIFY FOR DEDUCTION AS EXPENDITURE LAID OUT OR E XPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. WE HAVE NOT BEEN REFERRED TO ANY PROVISION IN THE ACT OR THE RULES DISALLOWING SUCH EXPENDITURE AS AN ITEM OF BUSINESS EXPENDITURE FOR THE PURPOSE OF SECTION 37 OF THE ACT . THOUGH THE LEARNED COUNSEL FOR THE REVENUE PLACED ITA NO. 2483 / MUM/20 1 3 10 CONSIDERABLE RELIANCE UPON THE DECISION IN CIT V/S CARBORUNDUM UNIVERSAL LTD. (1977) 110 ITR 621 (MAD), WE ARE OF THE VIEW THAT THAT DECISION DOES NOT IN ANY MANNER ASSIST THE REVENUE IN THAT CASE, THE ASSESSEE CLAIMED DEDU CTION OF A CERTAIN AMOUNT IN THE COMPUTATION OF ITS PROFITS AND GAINS OF THE BUSINESS BY WAY OF CONTRIBUTION TO THE SUPERANNUATION FUND OF ITS FOREIGN COLLABORATORS AND THAT CLAIM WAS DISALLOWED BY THE AUTHORITIES BELOW. HOWEVER, THE TRIBUNAL HELD THAT THO UGH THAT AMOUNT WAS NOT AN ALLOWABLE DEDUCTION UNDER SECTION 36(1)( II ) OF THE ACT AS THE CONTRIBUTION WAS NOT TO A RECOGNIZED PROVIDENT FUND OR TO AN APPROVED SUPERANNUATION FUND NOR COULD BE ALLOWED UNDER SECTION 37 OF THE ACT , THE PAYMENT WAS ALLOWABLE UNDER SECTION 28 OF THE ACT. ON A REFERENCE, IT WAS HELD THAT THE NATURE OF PAYMENT BEING ONE DESCRIBED IN SECTION 36(1)( I V ) OF THE ACT AND AS IT COULD NOT BE DEDUCTED UNDER THAT SECTION, IT CANNOT BE HELD TO BE DEDUCTIBLE UNDER SECTION 28 ON GENERAL PRIN CIPLES IN ARRIVING AT THE TRUE PROFITS AND GAINS OF THE BUSINESS IN A COMMERCIAL SENSE. IN THE VIEW WE HAVE TAKEN THAT THE EXPENDITURE INCURRED IN CONNECTION WITH THE OBTAINING OF POSITIVE PRINTS IS REALLY IN THE NATURE OF POST - PRODUCTION EXPENDITURE AND T HAT THERE IS NO PROVISION IN THE ACT OR THE RULES OBLIGING THE AUTHORITIES TO DISALLOW SUCH EXPENDITURE, THE CLAIM OF THE ASSESSEE THAT SUCH EXPENDITURE WOULD FALL UNDER SECTION 37 OF THE ACT IS, IN OUR VIEW, WELL - FOUNDED. WE, THEREFORE, ANSWER THE SECOND QUESTION REFERRED TO US IN THE AFFIRMATIVE AND AGAINST THE REVENUE. 27. FOLLOWING THE ABOVE DECISION OF HONBLE MADRAS HIGH COURT, THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF MUKTA ARTS PVT LTD (SUPRA) HAS HELD IN PARA 13 AND 21 AS UNDER : 1 3. AS NOTED, RULE 9A ALSO DEFINES 'COST OF PRODUCTION' TO MEAN, THE ENTIRE EXPENDITURE INCURRED ON THE PRODUCTION OF FILM. HOWEVER, ADVERTISEMENT EXPENDITURE INCURRED AFTER THE CENSOR BOARD CERTIFICATION IS OBTAINED AND ALSO THE COST OF POSITIVE PRINTS OF THE FILM ARE NOT TO BE INCLUDED AS PART OF THE COST OF PRODUCTION. THE EFFECT OF THE EXCLUSION OF THESE TWO ITEMS NORMALLY MEANS THAT THEY COULD BE ALLOWED IN THE YEAR IN WHICH THESE EXPENSES ARE INCURRED REGARDLESS OF WHETHER FILM IS RELEASED IN THAT YEAR OR NOT AS HELD BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V/S PRASAD PRODUCTIONS P. LTD. AS REPORTED IN [1989J 179 ITR 147 THE ITA NO. 2483 / MUM/20 1 3 11 COST OF MAKING POSITIVE PRINTS IS ALLOWABLE UNDER SECTION 37 OF THE ACT. FURTHER IN THE CASE OF B.NAGI REDDY V. CIT AS REPORTED IN [1993J 199 ITR 451, THE HON'BLE MADRAS HIGH COURT HELD THAT ANY LOSS ARISING ON ACCOUNT OF FEATURE FILM BEING ABANDONED MIDWAY WITHOUT COMPLETING IT THEN, THE EXPENDITURE INCURRED TILL THAT DATE INCLUDING THE PAYMENTS MADE TO ARTISTS, WRITERS ETC. WOULD BE ALLOWABLE AS A BUSINESS LOSS ON THE PRINCIPLE OF COMMERCIAL EXPEDIENCY. ALL THE ABOVE INSTANCES MAKE IT CLEAR THAT IN CASE OF FILM PRODUCER, THE EXPENSES WHICH DO NOT FORM PART OF COST OF PRODUCTION AS PER RULE 9A ARE ALLOWABLE AS PER THE NOR MAL PROVISIONS OF THE ACT. IT, THEREFORE, FOLLOWS THAT RULE 9A DOES NOT COVER ALL THESE SITUATIONS AND ALL TYPES OF EXPENSES, HENCE THE PROPOSITION THAT IT OVERRIDES THE PROVISIONS OF THE ACT ON THE FACE OF IT, IS NOT VALID. 21. RULE 9A IS AN OUTCOME OF EXERCISE OF POWER GIVEN TO THE CENTRAL BOARD OF DIRECT TAXES UNDER SECTION 295(1) OF THE INCOME - TAX ACT, 1961. THUS IT IS A PIECE OF DELEGATED LEGISLATION AND MUST FUNCTION WITHIN THE PARAMETERS FIXED BY LEGISLATURE BY LAYING DOWN THE LAW, THE POLICY AND THE STANDARD WHICH LEGISLATURE WANTS TO MAINTAIN IN THE APPLICATION AND ENFORCEMENT OF THE LEGISLATIVE ENACTMENT AND BE CONSISTENT THEREWITH. IT, THEREFORE, FOLLOWS THAT AN ANCILLARY CHANNEL, AT ANY RATE, CANNOT NEITHER ABRIDGE RIGHTS OR PRIVILEGES GRANTE D BY THE STATUTE ITSELF NOR CONFER ANY SPECIAL BENEFITS, RIGHTS OR PRIVILEGES BEYOND THE PROVISIONS OF THE ACT OR IN CONTRADICTION TO THE PROVISIONS OF THE LEGISLATIVE ENACTMENT BECAUSE THE OBJECT SUBORDINATE LEGISLATION IS TO CARRY OUT THE STATUTORY PROVI SIONS EFFECTIVELY AND NOT TO NEUTRALIZE OR CONTRADICT THEM. IF DELEGATED LEGISLATION RESULTS INTO ANY SUCH SITUATIONS THAT WOULD AMOUNT TO LEGISLATION ITSELF AND WHICH CANNOT BE ABDICATED BY THE LEGISLATURE. IN THIS VIEW OF THE MATTER, IT IS NOT WITHIN THE POWER OF THE CENTRAL BOARD OF DIRECT TAXES TO CREATE A LEGAL FICTION LIKE RULE 9A IN THE FASHION AS CONTENDED BY LEARNED COUNSEL FOR THE ASSESSEE BECAUSE THIS INTERPRETATION WOULD GO BEYOND THE LEGISLATIVE POLICY ENACTED IN THE FORM OF SECTION 37(2), 37(2 A), 37(3) ETC. OF THE ACT AND MAKE R ULE 9A VOID. IT IS ALSO A SETTLED JUDICIAL PRINCIPLE THAT SUBORDINATE LEGISLATION IN CASE OF CONFLICT MUST YIELD TO PLENARY LEGISLATION. THE NEGATIVE COVENANT/RESTRICTED PROVISIONS LIKE SECTION 37(2A) HAVE BEEN ENACTED W ITH THE OBJECT OF RESTRICTING THE DEDUCTION OF EXPENDITURE WHICH IS OTHERWISE ALLOWABLE UNDER SECTION 37. IT IS A FACT THAT EXPENDITURE INCURRED AFTER THE ISSUE OF CERTIFICATION BY THE CENSOR BOARD ON ACCOUNT OF ADVERTISEMENT AND PUBLICITY AND COST OF POSI TIVE PRINTS ARE ALLOWABLE UNDER ITA NO. 2483 / MUM/20 1 3 12 SECTION 37(1) AND, THEREFORE, SUCH EXPENSES COME WITHIN THE PURVIEW OF SECTION 37(3) OF THE ACT EXPENDITURE ON AND COST OF POSITIVE PRINTS HAS TO SATISFY THE CONDITIONS OF SECTION 37 FOR ALLOWANCE. THUS, THERE APPEARS NO REA SONABLE BASIS TO ALLOW THE SAME EXPENDITURE INCURRED BEFORE HAPPENING OF AN EVENT I.E.. UP TO THE DATE OF ISSUE OF CERTIFICATE BY THE CENSOR BOARD IN TOTAL WITHOUT ANY RESTRICTION WHATSOEVER AND ALLOW THE EXPENDITURE OF THE SAME NATURE INCURRED AFTER THE I SSUANCE OF CERTIFICATE BY THE CENSOR BOARD SUBJECT TO RESTRICTIVE PROVISIONS OF SECTION 37 OF THE ACT. THIS VIEW CAN FURTHER BE SUBSTANTIATED BY THE FACT THAT THE LEGISLATURE HAS NOT GIVEN OVERRIDING EFFECT TO RULE 9A BY NOT FRAMING THE SAID RULE AS NOTW ITHSTANDING ANYTHING CONTAINED IN ANY PROVISIONS OF THE ACT AND/OR ANY OTHER RULE OF THE INCOME TAX RULES, 1962, FURTHER , THERE IS ALSO NO COMMERCIAL/BUSINESS NECESSITY, ATTACHED TO FILM PRODUCTION WHICH MAY JUSTIFY THE EXEMPTION TO FILM PRODUCERS FROM THE APPLICABILITY OF THE PROVISIONS OF SECTION 37(2A) AND / OR OR SECTION 37(3) IN RESPECT OF EXPENDITURE FORMING PART OF COST OF PRODUCTION AS PER RULE 9A 28. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN CA SE OF PRASAD PRODUCTIONS PVT.LTD AS WELL AS DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF MUKTA ARTS PVT LTD. WE HOLD THAT THE EXPENDITURE INCURRED IN RESPECT OF PREPARATION OF PO SI TIVE PRINTS AS WELL AS ADVERTISEMENT AND PUBLICITY ARE ALLOWABLE. ACCORDINGLY THE ADDITION ENHANCE BY THE CIT (A) IS DELETED THE LD D.R, ON THE CONTRARY, STRONGLY SUPPORTED THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. SINCE THE CO - ORDINATE BENCH OF TRIBUNAL HAS ALREADY TAKEN THE VIEW ON THIS ISSUE IN FAVOU R OF THE ASSESSEE, CONSISTENT WITH THE VIEW TAKEN BY THE CO - ORDINATE BENCH WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION OF ADVERTISEMENT EXPENSES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE D ISALLOWANCE OF ADVERTISEMENT EXPENSES. 5. THE NEXT ISSUE RELATES TO ADHOC DISALLOWANCE MADE OUT OF VARIOUS EXPENSES. THE ASSESSING OFFICER DISALLOWED 25% OF THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE FOLLOWING HEADS ON THE REASONING THAT THE ITA NO. 2483 / MUM/20 1 3 13 ASSESSE E HAS FAILED TO PRODUCE PRIMARY EVIDENCES RELATING TO THESE EXPENSES: - (A) PAYMENT MADE TO JUNIOR ARTISTES (B) COSTUMES & DRESSES (C) MAKE UP & HAIR DRESSERS (D) DUBBING, SONG RECORDING & MIXING EXPENSES (E) DANCERS EXPENSES & CO - ORDINATION CHARG ES (F) SETTING EXPENSES THE LD CIT(A) ALSO CONFIRMED THE SAME. 6. THE LD A.R SUBMITTED IDENTICAL ISSUES WERE CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE RELATING TO AY 2006 - 07 (SUPRA), WHEREIN THE TRIBUNAL DELETED TH E DISALLOWANCE PERTAINING TO PAYMENT MADE TO JUNIOR ARTISTES AND RESTRICTED THE DISALLOWANCES MADE FROM OTHER ITEMS OF EXPENSES AT 5%. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS BEEN MAINTAINING ALL THE VOUCHERS WITH PROPER DETAILS AND HENCE DISALLOWANCES ARE NOT CALLED FOR. HE SUBMITTED THAT THE ASSESSEE IS REQUIRED TO PREPARE CONTINUITY REPORT BY DIRECTOR, LOG BOOK W.R.T. HIRING OF EMPLOYEES, FILM EDITORS REPORT, COPIES OF CALL SHEETS AND REHEARSAL BOOK FOR PLANNING THE SHOOTING. HE SUBMITTED THAT THE A SSESSEE DESTROYS ALL THESE DOCUMENTS AFTER COMPLETION OF THE SHOOTING, AS THEY ARE NO LONGER REQUIRED THEREAFTER AND ALSO DUE TO SPACE CONSTRAINTS. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS MADE IMPUGNED DISALLOWANCES FOR THE REASON THAT THE ASS ESSEE DID NOT PRODUCE THOSE TECHNICAL DOCUMENTS, AS ACCORDING TO HIM THEY ARE PRIMARY DOCUMENTS. THE LD A.R SUBMITTED THAT THE REQUIRED DETAILS RELATING TO THE EXPENSES ARE AVAILABLE IN THE VOUCHERS PREPARED BY THE ASSESSEE AND THEY ARE DULY SUPPORTED BY THE RELEVANT BILLS AND PAYMENT DETAILS. ACCORDINGLY LD A.R SUBMITTED THAT THE GENUINENESS OF EXPENSES COULD BE ASCERTAINED FROM THE RECORDS MAINTAINED IN THE ACCOUNTS DEPARTMENT AND HENCE THE AO WAS NOT JUSTIFIED IN INSISTING UPON THE PRODUCTION OF TECHNI CAL DOCUMENTS RELATING TO ITA NO. 2483 / MUM/20 1 3 14 PRODUCTION PROGRAMS. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT CONSIDER THE EXPENSES AS BOGUS AND HENCE HE HAS RESTRICTED THE DISALLOWANCES TO 25%. HE SUBMITTED THAT THE CO - ORDINATE BENCH OF TRIBUNAL HAS ALSO ACCEP TED THIS FACT IN AY 2006 - 07 AND HAS ALSO OBSERVED THAT THESE EXPENSES ARE ESSENTIAL IN THE PRODUCTION OF FILM. HOWEVER, THE TRIBUNAL CHOSE TO RESTRICT THE DISALLOWANCE TO 5% OF EXPENSES BY FOLLOWING THE DECISION RENDERED IN THE CASE OF YAS RAJ FILMS PVT L TD (ITA NO.6350/M/2010 DATED 5.4.2013). 7. THE LD A.R SUBMITTED THAT IDENTICAL ISSUES WERE CONSIDERED BY ANOTHER CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHRI KARAN YASH JOHAR, PROPRIETOR OF DHARMA PRODUCTIONS, WHO ALSO HAPPENS TO BE THE DIRECT OR OF THE ASSESSEE COMPANY IN ITA NO.2591/MUM/2013 & 2592/MUM/2013 RELATING TO AY 2007 - 08 AND 2009 - 10. HE SUBMITTED THAT THE CO - ORDINATE BENCH, VIDE ITS ORDER DATED 15.4.2015, AFTER CONSIDERING THE DECISION RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE RELATING TO AY 2006 - 07, HAS TAKEN THE VIEW THAT NO DISALLOWANCE WAS CALLED FOR. HE SUBMITTED THAT LATEST DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF SHRI KARAN YASH JOHAR (SUPRA) MAY ALSO BE FOLLOWED IN THE INSTANT CASE ALSO. 8. ON THE CON TRARY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER WAS CONSTRAINED TO MAKE AD - HOC DISALLOWANCES, SINCE THE ASSESSEE COULD NOT FURNISH THE DETAILS THAT WERE CALLED FOR BY THE AO. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING T HE AD - HOC DISALLOWANCES MADE BY THE AO. 9. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS MADE AD - HOC DISALLOWANCES @ 25% FROM SOME OF THE EXPENSES IN AY 2006 - 07 ALSO. THEY WERE CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL AND THE TRIBUNAL HAS DELETED THE DISALLOWANCE MADE OUT OF PAYMENT MADE TO JUNIOR ARTISTES AND RESTRICTED ITA NO. 2483 / MUM/20 1 3 15 THE DISALLOWANCES IN RESPECT OF OTHER ITEMS OF EXPENSES TO 5% BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF YAS RAJ FILMS PVT LTD (SUPRA). 10. IN THE INSTANT YEAR, THE AO HAS TAKEN THE ASSESSEE HAS FAILED IN HIS OBLIGATION TO SUBSTANTIATE ITS CLAIM FOR EXPENSES. THE AO HAS TAKEN THE VIEW THAT THE FOLLOWING RECORDS ARE NECESSARY TO EXAMINE THE C LAIM MADE BY THE ASSESSEE TOWARDS EXPENSES: - (A) TIME TABLE RELEVANT FOR CHECKING CORRECTNESS OF STUDIO HIRE EXPENSES. (B) FILM EDITORS REPORT RELEVANT FOR ASCERTAINING CONSUMPTION OF RAW FILM. (C) LABORATORY REGISTERS GIVE DETAILS OF FOOTAGE OF NEG ATIVES, POSITIVES AND SOUND FILM PROCESSED FOR PARTICULAR PICTURE. (D) CALL SHEETS CONTAINING DETAILS OF ARTISTES, JUNIOR ARTISTES AND TECHNICIANS ENGAGED ON ANY PARTICULAR DAY FOR SHOOTING. (E) REHEARSAL BOOK CONTAINING DETAILS OF ARTISTES PARTICIPATI NG IN REHEARSALS. (F) STATEMENT GIVEN BY CONTROLLER OF PRODUCTION RELATING TO ARRANGEMENTS MADE FOR SHOOTING. HOWEVER ACCORDING TO THE ASSESSEE, THESE RECORDS ARE TECHNICAL RECORDS RELATING TO PLANNING FOR FILM SHOOTING AND THESE RECORDS WOULD BE DESTROY ED AFTER COMPLETION OF SHOOTING AS THEY ARE NO LONGER REQUIRED AND ALSO DUE TO SPACE CONSTRAINTS. 11. THE QUESTION THAT ARISES IS WHETHER THESE RECORDS ARE ESSENTIAL TO ASCERTAIN THE GENUINENESS OF EXPENSES. ACCORDING TO THE ASSESSEE, THE EXPENSES INCURRED UNDER VARIOUS HEADS ARE DULY SUPPORTED BY THE RELEVANT VOUCHERS, BILLS ETC AND HENCE THESE TECHNICAL REPORTS ARE NOT REQUIRED TO EXAMINE THE GENUINENESS OF EXPENSES. ON THE CONTRARY, THE STAND OF THE AO IS THAT THESE TECHNICAL REPORTS WOULD HELP TO EXAMINE THE EXPENSES. ITA NO. 2483 / MUM/20 1 3 16 12. WE NOTICE THAT IDENTICAL ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF SHRI KARAN YASH JOHAR (SUPRA) AND THE TRIBUNAL HAS HELD AS UNDER: - 19. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND TH AT EXPENSES SO CLAIMED ARE REQUIRED TO BE ALLOWED AS PER PROVISIONS OF RULES 6F, WHICH PRESCRIBES THE LIST OF BOOKS OF ACCOUNTS REQUIRED TO BE MAINTAINED BY PROFESSIONALS. THE DOCUMENTS CALLED FOR BY THE A.O. ARE NOT MENTIONED IN THE LIST PRESCRIBED UNDE R RULES 6F. THE ISSUE IS COVERED BY THE DECISION OF ITAT IN THE CASE OF M / S DHARMA PRODUCTIONS PVT. LTD., ITA NO.2480&4791/MUM/2013, DATED 18 - 9 - 2013, WHEREIN ASSESSEE IS A DIRECTOR AND HE IS ALSO INTO MOVIE PRODUCTION BUSINESS. THE TRIBUNAL RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 5% OF SUCH EXPENSES. THE TRIBUNAL OBSERVED AT PARA 22, PAGE 23 OF THE ORDER THAT THE A.O. HAS NOT GIVEN A FINDING THAT THE BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE, ON THE BASIS OF WHICH EXPENDITURE HAS BEEN RECORDED IN B OOKS, ARE BOGUS. FURTHER, A CLEAR F INDING HAS BEEN GIVEN THAT THE DOCUMENTS CALLED FOR BY THE A.O. ARE MAINTAINED FOR THE PURPOSE OF SHOOTING AND ARE NOT PART OF THE ACCOUNTS BOOK. THAT ONCE THE SHOOTING OF A FILM IS OVER THERE IS NO PURPOSE TO KEEP SUCH A RECORD WHICH IS OTHERWISE NOT FEASIBLE. HOWEVER, SUBSEQUENTLY, RELYING ON THE DECISION OF ITAT IN THE CASE OF YASH RAJ FILMS PVT LTD. V. ACIT BEARING ITA NO. 6350 / M / 2010, DATED 05.04.2013, THE DISALLOWANCES WERE RESTRICTED TO 5%. 20. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS PROVIDED ALL THE BILLS AND VOUCHERS IN SUPPORT OF HIS CLAIM OF THE EXPENDITURES. THE SAID FACT HAS ALSO BEEN ACCEPTED BY THE A.O. AT PAGE 1, PARA 2 OF THE ASSESSMENT ORDER STATING THAT 'THE BOOKS OF ACCOUNTS MAINTAINED BY THE A SSESSEE ALONG WITH BILLS VOUCHERS WERE PRODUCED' AND AGAIN AT PAGE 15 STATING THAT 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAS PRODUCED VARIOUS DETAILS / VOUCHERS / BILLS ETC. FOR VERIFICATION'. IT IS NOT THE CASE OF THE A.O. THAT THE EXP ENSES INCURRED, IS BOGUS. THUS, THE RATIO OF THE FINDING IN THE CASE OF M/S DHARMA PRODUCTIONS PVT LTD IN RESPECT OF THE DOCUMENTS CALLED FOR BY THE A.O., IS ALSO APPLICABLE IN THE GIVEN CASE, AS THE FACTS OF BOTH THE CASES ARE IDENTICAL. SINCE IN THE INST ANT CASE PROPER RECORDS HAVE BEEN MAINTAINED AND ALSO FURNISHED BEFORE THE AO AND IT WAS ONLY THE CASE OF NON - PRODUCTION OF TECHNICAL DOCUMENTS RELATING TO PRODUCTION OF FILMS, THE DISALLOWANCE WAS MADE BY THE AO. HOWEVER, A CLEAR FINDING HAS BEEN GIVEN B Y THE TRIBUNAL IN THE CASE OF M / S DHARMA ITA NO. 2483 / MUM/20 1 3 17 PRODUCTION PVT. LTD. THAT THESE TECHNICAL DOCUMENTS ARE NOT REQUIRED TO BE MAINTAINED. ACCORDINGLY, WE DO NOT FIND ANY MERIT FOR ADHOC DISALLOWANCE MERELY FOR THE REASONS THAT SUCH TECHNICAL DOCUMENTS RELATING TO PR ODUCTION OF FILMS WERE NOT PRODUCED BY THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADHOC DISALLOWANCE SO M ADE. IN THE ABOVE SAID CASE, THE TRIBUNAL HAS TAKEN NOTE OF THE FACT THAT THE ASSESSING OFFICER HIMSELF HAS OBSERVED THAT THE ASSESS EE HAD PRODUCED VARIOUS DETAILS/VOUCHERS/BILLS ETC. FOR VERIFICATION. THE TRIBUNAL HAS FURTHER NOTICED THAT THE AO HAS NOT HELD THE EXPENSES TO BE BOGUS. FURTHER THE TRIBUNAL HAS ALSO OBSERVED THAT THE KEEPING OF TECHNICAL DOCUMENTS RELATING TO PRODUCTIO N OF FILM IS NOT FEASIBLE. ACCORDINGLY, THE TRIBUNAL HAS TAKEN THE VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING ADHOC DISALLOWANCES FOR NON FURNISHING OF TECHNICAL DETAILS. 13. A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT THE ASSESSING OFFICER HAS MADE IDENTICAL OBSERVATIONS RELATING TO PRODUCTION OF BOOKS OF ACCOUNTS, BILLS, VOUCHERS ETC. HOWEVER, THE AO HAS TAKEN THE VIEW THAT THE TECHNICAL DOCUMENTS WOULD FORM THE PRIMARY DOCUMENTS AND HENCE HE HAS PROPOSED TO MAKE AD - HOC DISALLOWANCES. IN OUR VIEW, THE AO HAS GONE WRONG ON THIS POINT. IN OUR VIEW, THE PRIMARY DOCUMENTS ARE RELEVANT VOUCHERS, BILLS, INVOICES ETC., SINCE THE EXPENSES INCURRED AND PAYMENTS ARE MADE ON THE BASIS OF THESE DOCUMENTS ONLY. THE TECHNICAL DOCUMENTS CONSTITUTE THE PLA NS FOR THE PROPOSED FILM SHOOTING AND HENCE, THE TECHNICAL DOCUMENTS, IN OUR VIEW, CANNOT BE CALLED AS PRIMARY DOCUMENTS AND AT THE MOST, THEY MAY BE CALLED AS SECONDARY DOCUMENTS WHICH MAY BE USED TO CORROBORATE THE EXPENSES CLAIMED THROUGH THE PRIMARY DO CUMENTS. FURTHER, THE TECHNICAL DOCUMENTS NORMALLY SHALL NOT INDICATE THE AMOUNT TO BE SPENT, SINCE THE SAME WOULD DEPEND UPON THE MARKET EXPENSES. FOR EXAMPLE, IT MAY INDICATE ABOUT THE NUMBER OF JUNIOR ARTISTES REQUIRED FOR SHOOTING A PARTICULAR SCENE, IT MAY NOT SPECIFY THE SALARY TO BE ITA NO. 2483 / MUM/20 1 3 18 PAID TO THOSE ARTISTES. HENCE, THE QUANTUM OF EXPENDITURE CAN BE ASCERTAINED ONLY THROUGH THE PRIMARY DOCUMENTS. THE NECESSITY TO REFER TO THE SECONDARY DOCUMENTS, IN OUR VIEW, WOULD ARISE ONLY IF THE PRIMARY DOCUMENTS ARE DOUBTED WITH. IN THE INSTANT CASE, WE NOTICE THAT THE ASSESSING OFFICER DID NOT HAVE ANY DOUBT WITH THE PRIMARY DOCUMENTS. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS INFLATED THE EXPENSES OR BOOKED BOGUS EXPENSES. WE NO TICE THAT THE ASSESSING OFFICER HAS ONLY MADE SOME BALD OBSERVATIONS THAT SOME OF THE ITEMS ARE UNDER SELF MADE VOUCHERS/CASH PAYMENTS/CASH MEMOS/BILLS FROM UNREGISTERED DEALERS WITHOUT POINTING OUT ANY SPECIFIC INSTANCES. HENCE, WE ARE OF THE VIEW THAT T HE ASSESSING OFFICER DID NOT MAKE ANY STRONG CASE IN SUPPORT OF DISALLOWANCE MADE BY HIM. WE HAVE EARLIER NOTICED THAT THE CO - ORDINATE BENCH IN THE ASSESSEES OWN CASE AS WELL IN THE CASE OF SHRI KARAN YASH JOHAR (SUPRA) HAS TAKEN THE VIEW THAT THE TECHNI CAL DOCUMENTS ARE NOT REALLY REQUIRED TO ASCERTAIN THE GENUINENESS OF THE EXPENSES AND FURTHER HELD THAT THE MAINTENANCE OF THE SAME WAS NOT FEASIBLE FOR VALID REASONS. ACCORDINGLY, IN THE CASE OF SHRI KARAN YASH JOHAR (SUPRA), THE TRIBUNAL HAS TAKEN THE VIEW THE DISALLOWANCES WERE NOT CALLED MERELY FOR WANT OF TECHNICAL DOCUMENTS. 14. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE SAID CASE, WE ALSO HOLD THAT THE IMPUGNED DISALLOWANCES WERE NOT CALLED FOR MERELY FOR WANT OF TECHNICAL DOCUMENTS, WHEN T HE ASSESSING OFFICER DID NOT SUSPECT THE PRIMARY DOCUMENTS MAINTAINED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LD CIT(A) IN RESPECT OF ALL THESE DISALLOWANCES AND DIRECT THE AO TO DELETE THE IMPUGNED DISALLOWANCES. ITA NO. 2483 / MUM/20 1 3 19 15. IN T HE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 9TH SEPT, 2015. 9TH SEPT , 2015 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 9TH SEPT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI