SHRI KARAN YASH JOHAR, MUMBAI V. ACIT, CENTRAL CIRCLE - 31, MUMBAI

ITA 2592/MUM/2013

• Counselvise Citation: 259219914 RSA 2013
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 21-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Depreciation; Earning of tax free income; Corroborative evidences; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S HRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 2591 /MUM/20 1 3 ( / ASSES SMENT YEAR 200 7 - 0 8 ./ I.T.A. NO. 2592 /MUM/2013 ( / ASSESSMENT YEAR 2009 - 10 SHRI KARAN YASH JOHAR, (PROP. M/S DHARMA PRODUCTIONS), JAINS ARCADE, 2 ND FLOOR, 14 TH ROAD, KHAR (W), MUMBAI 400 0 5 2 . / VS. DY. COMMISSIONER OF I NCOME TAX CENTRAL CIRCLE 31, AAYAKAR BHAVAN, MUMBAI. ./ PAN : AAAPJ7657A ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI VIJAY MEHTA R E SPONDENT BY : SHRI PAVAN KUMAR BEERLA / DATE OF HEARING : 21 - 01 - 2015 / DATE OF PRONOUNCEMENT : 15 - 04 - 2015 / O R D E R PER R.C. SHARMA, AM : TH ESE ARE THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST TWO SEPARATE ORDER S PASSED BY THE LD. CIT(A) - 40 , MUMBAI BOTH DATED 10 - 01 - 2013 FOR THE ASSESSMENT YEAR S 200 7 - 0 8 & 2009 - 10 IN THE MATTER OF ORDER U/S 143(3) OF THE INCOME TAX, 1961. 2. THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2007 - 08, HAS TAKEN THE FOLLOWING GROUNDS : - ITA 2591 & 2592 / M/ 1 3 2 GROUND NO.1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. AO. OF RS. 3,414/ - OUT OF CAR INSURANCE CLAIMED AT RS. 34,139/ - . THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. AO. OF RS. 11,698/ - OUT OF D EPRECIATION ON CAR CLAIMED AT RS. 1,16,981/ - . THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO 3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING TH E ADHOC DISALLOWANCE @10% MADE BY THE LD. AO. OF RS. 19,176/ - OUT OF MOTOR CAR EXPENSES CLAIMED AT RS.1,91,755/ - . THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO 4: ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE HON'BLE C I T (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. A.O. OF RS. 1,11,628/ - OUT OF RS. 11,16,282/ - CLAIMED AS COSTUME AND DRESSES EXPENSES. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIF IED AND MAY PLEASE BE DELETED. GROUND NO 5: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE LD. A.O. OF RS. 2,25,213/ - U/S.14A READ WITH RULE 8D OF THE LT. ACT. THE APPELLAN T PRAYS THAT THE SAID ADDITION IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.6: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. A.O. OF RS. 94,53,684/ - INCURRE D ON PURCHASES OF PAINTING FOR THE PURPOSE OF BUSINESS, BY TREATING THE SAME AS CAPITAL EXPENDITURE. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.7: ITA 2591 & 2592 / M/ 1 3 3 WITHOUT PREJUDICE TO GROUND NO.6, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN NOT ALLOWING THE ALTERNATE CLAIM OF THE APPELLANT FOR DEPRECIATION ON THE PAINTINGS @ 10% UNDER THE HEAD 'FURNITURE AND FITTINGS'. THE APPELLANT PRAYS THAT THE ACTION OF THE CIT(A) I S TOTALLY UNJUSTIFIED. GROUND NO.8: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @15% MADE BY THE LD. AO. OF RS. 2,67,722/ - OUT OF EXPENDITURE OF RS. 17,84,811/ - PAID TO J UNIOR ARTISTS AND TECHNICIANS. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.9: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLO WANCE @15% MADE BY THE LD. AO OF RS. 21,86,227/ - OUT OF EXPENDITURE OF RS. 1,45,74,847/ - INCURRED IN RESPECT OF COSTUMES & DRESSES. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO. 10: ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @15% MADE BY THE LD. AO. OF RS. 74,819/ - OUT OF EXPENDITURE OF RS. 4,98,792 INCURRED IN RESPECT OF MAKEUP AND HAIRDRESSERS. THE APPELLANT PRAYS THA T THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO. 11: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @15% MADE BY THE LD. AO. OF RS. 5,55,846/ - OUT OF EXPENDITURE OF RS. 37,05,639/ - INCURRED ON ACCOUNT OF DUBBING, SONG RECORDING & MIXING EXPENSES. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO. 12: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @15% MADE BY THE LD. AO. OF RS. 18,74,668/ - OUT OF THE EXPENDITURE OF RS. 1,74,97,785/ - INCURRED IN RESPECT OF DANCERS AND DANCE EXPENSES. THE APPELLANT PRAYS THAT THE SAID DISAL LOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO. 13: ITA 2591 & 2592 / M/ 1 3 4 ON THE' FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @15% MADE BY THE LD. A.O. RS. 44,10,749/ - OUT OF EXPENDITURE OF RS. 2,94,04,996/ - INCURRED AS SETTING EXPENSES. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. 3. THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 200 9 - 10 , HAS TAKEN THE FOLLOWING GROUNDS : - GROUND NO.1: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. AO. OF RS. 2,46,722/ - OUT OF MOTOR CAR EXPENSE & DEPRECIATION ON MOTOR CAR OF RS.24,67,220/ - (8,88,898+15,78,322 ). THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.2: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. AO. OF RS. 50,768/ - OUT OF COSTUMES AND DRESSES EXPENSE OF RS.5,07,680/ - . THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. GROUND NO.3: THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT ( A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. A.O. OF RS.39,3061 - OUT OF RS. 3,93,060 / - [RS. 4,30,383 ( - ) RS. 37,323] CLAIMED AS TELEPHONE EXPENSE. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELET ED. GROUND NO.4: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE CIT (A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE @10% MADE BY THE LD. A. O . OF RS.L,44,009 / - OUT OF RS.14,40,091 / - CLAIMED AS SELLING EXPENSE BY TREATING IT AS PERSONAL IN NATURE. THE APPELLANT PRAYS THAT THE SAID DISALLOWANCE IS UNJUSTIFIED AND MAY PLEASE BE DELETED. 4 . COMMON GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND DISPOSE OF BY THIS SINGLE CON SOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA 2591 & 2592 / M/ 1 3 5 5 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. F ACTS OF THE CASE ARE THAT THE A SSESSEE IS PROPRIETOR OF M/S DHARMA PRODUCTIONS ENGAGED IN FILM PRODUCTION AND DISTRIBUTION. DURING THE YEAR THE ASSESSEE HAS DERIVED INCOME FROM THE SAID PROPRIETARY CONCERN AND ALSO INCOME FROM PROFESSION. DURING THE COURSE OF SCRUTINY ASSESSMENT FOR A.Y. 2007 - 08, THE A.O. MADE ADHOC DISALLOWANCE OF RS. 34 14 / - OUT OF CAR INSURANCE, RS. 11, 698 / - OUT OF DEPRECIATION ON CAR, RS. 19,176/ - OUT OF MOTOR CAR EXPENSES, RS. 1,11,628/ - OUT OF COSTUME AND DRESS EXPENSES, RS. 2,67,722/ - OUT OF PAYMENTS MADE TO JUNIOR ARTISTS AND TECHNICIANS, RS. 21,86,227/ - OUT OF COSTUMES AND DRESS EXPENSES, RS. 74,819/ - OUT OF MAKEUP AND HAIRDRESSER S EXPENSES, RS. 5,55,846/ - OUT OF DUBBING, SONG RECORDING AND MIXING EXPENSES, RS. 18,74,668/ - OUT OF EXPENSES INCURRED ON DANCERS AND DANCE EXPENSES AND RS. 44,10,749/ - OUT OF SETTING EXPENSES. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE DISALLOWA NCE BY OBSERVING THAT THE EXPENSES INCURRED ON THE MOTOR CAR , THERE IS PERSONAL ELEMENT IS INVOLVED AND SIMILARLY THE FAMILY MEMBERS MIGHT HAVE UTILIZED THE COSTUMES AND DRESSES FOR THEIR PERSONAL USE. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSEE IS A TV ANCHOR WHO EARNS SUBSTANTIAL PART OF HIS INCOME FROM ANCHORING. THE PROFESSION OF THE ASSESSEE REQUIRES HIM TO BE PRESENTABLE WHILE HOSTING THE TV SHOW AND, THEREFORE, EXPENDI TURE INCURRED BY THE ASSESSEE FOR COSTUMES AND DRESS MATERIALS ARE FOR THE PURPOSE OF BUSINESS ONLY . SIMILAR ISSUE HAS BEEN DECIDED BY THE ITAT IN THE CASE OF AMEESHA A. PATEL IN ITA NO.5883/MUM/2009 FOR A.Y.2004 - 05, DATED 28 - 1 - 2011. EVEN IN THIS CASE, THE AO HAD MADE ADHOC DISALLOWANCE OF EXPENSES @15% ON THE GROUND THAT PERSONAL ELEMENT IN SUCH EXPENSES CANNOT BE RULED OUT, WHICH WAS LATER CONFIRMED BY THE CIT(A). ON APPEAL BEFORE THE HONBLE ITAT, IT WAS HELD AS UNDER : - 6. IT IS IMPORTANT TO BEAR IN MIN D THE FACT THAT ISSUE BEFORE US IS NOT WHETHER COSTUME AND MAKE UP EXPENSES CONSTITUTE ADMISSIBLE DEDUCTION, BECAUSE THE ASSESSING OFFICER HIMSELF HAS ALLOWED DEDUCTION IN RESPECT OF ITA 2591 & 2592 / M/ 1 3 6 THE SAME, BUT THE QUESTION REQUIRING OUR ADJUDICATION REALLY IS WHETHER A PART OF SUCH EXPENSES INCURRED BY THE ASSESSEE COULD BE DISALLOWED ON THE GROUND THAT THESE EXPENSES ARE PERSONAL IN NATURE. ONCE THE ASSESSING OFFICER ACCEPTS THAT THE MAKE UP AND COSTUME EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES PROFESSION AND ARE NOT IN THE NATURE OF PERSONAL EXPENSES OF THE ASSESSEE AS IS THE CONDITION PRECEDENT FOR ALLOWING THE EXPENSES UNDER SECTION 37(1), IT CANNOT BE OPEN TO HIM TO TREAT THE SAME AS PERSONAL EXPENSES. THERE IS INHERENT CONTRACTIO N IN THE STAND SO TAKEN BY THE ASSESSING OFFICER, WHICH HAS MET THE APPROVAL OF THE CIT (A) AS WELL. THE COMPULSIONS OF PUBLIC GLARE AND VIRTUAL BLURRING OF THE LINE OF DEMARCATION BETWEEN PERSONAL LIFE AND PROFESSIONAL LIFE REQUIRES THESE GLAMOUR PROFESSI ONALS TO BE ON THEIR BEST ALL THE TIME, AND NO PART OF THE EXPENSES ON THEIR MAKE UP AND COSTUMES CAN, FOR PUBLIC APPEARANCES THEREFORE, BE DISALLOWED AS PERSONAL EXPENSES PARTICULARLY ON THE FACTS OF THIS CASE IN WHICH THE ASSESSING OFFICER HIMSELF HAS AL LOWED MAJOR PART OF SUCH EXPENDITURE. WE HAVE ALSO NOTED THAT ALL THE BILLS, VOUCHERS AND SUPPORTING EVIDENCES ARE DULY FURNISHED BEFORE THE AO AND INFIRMITY HAS BEEN FOUND IN THESE EVIDENCES. IT IS NOT EVEN REVENUES CASE THAT THE ASSESSEE HAS NOT SHOWN A NY PERSONAL EXPENSES, SUCH AS ON HER CLOTHES, AT ALL. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCES OF THE ASSESSEE. WE, THEREFORE, DIRECT THE AO TO DELETE THE IMPUGNED DISALLOWANCE. IN ADDITION TO THE A BOVE, WE FOUND THAT SIMILAR ADDITION MADE IN THE CASE OF ASSESSEE IN THE ASSESSMENT YEARS 2006 - 07 & 2008 - 09 WAS DELETED BY THE CIT(A). IN THE YEAR UNDER CONSIDERATION, THE CIT(A ) HAS CONFIRMED THE DISALLOWANCE OF COSTUMES AND DRESS EXPENSES ON THE ASSUMPTI ON THAT THERE COULD BE POSSIBILITY OF PERSONAL USAGE IN SUCH EXPENSES . KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS BEING ANCHOR, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE CIT(A) FOR DISALLOWING EXPENDITURE INCURRED ON COSTUMES AND DRESS WHICH WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 7. SO FAR AS DISALLOWANCE ON ACCOUNT OF CAR INSURANCE, DEPRECIATION ON CAR, MOTOR CAR EXPENSES ARE CONCERNED, KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS, WE RESTRICT THE DISALLOWANCE TO 5% OF THE EXPENDITURE SO INCURRED. 8. IN GROUND NO.5, THE ASSESSEE IS AGGRIEVED FOR DISALLOWANCE CONFIRMED BY THE CIT(A) U/S.14A READ WITH RULE 8D AMOUNTING TO RS. 2,25,213/ - . ITA 2591 & 2592 / M/ 1 3 7 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS MECHANICALLY APPLIED THE PROVISIONS OF RULE 8D, WHICH IS NOT APPLICABLE IN THE RELEVANT ASSESSMENT YEAR 2007 - 08 UNDER CONSIDERATION AS PER VERDICT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., 322 ITR 81 . KEEPING IN VIEW THE TOTALITY OF FACT S AND CIRCUMSTANCES, WHERE THE AO HAS NOT RECORDED ANY FINDING TO SUBSTANTIATE THAT ANY EXPENDITURE HAS BEEN INCURRED FOR THE PURPOSE OF EARNING THE EXEMPT INCOME, WE RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS. 1,00,000/ - I NSOFAR AS THE ENTIRE EXEMPT INC OME WAS ON ACCOUNT OF TAX FREE BOND, SHARES, PPF ETC. 10. IN GROUND NO.6 , THE ASSESSEE AGGRIEVED FOR DISALLOWANCE OF EXPENDITURE ON PURCHASE OF PAINTINGS FOR THE PURPOSE OF BUSINESS. THE AO HAS DISCUSSED THE ISSUE AT PARA 6 OF HIS ASSESSMENT ORDER. AFTER REFERRING TO SECTION 37(1), THE AO OBSERVED THAT EXPENDITURE WAS CAPITAL IN NATURE, THEREFORE, NO T ALLOWABLE U/S.37(1). 11. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 12. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ASSESSEE IS AGGRIEVED FOR DISALLOWANCE OF PAINTING EXPENSES AT SL.NO.1,2 & 4 AGGREGATING TO RS. 94,53,684/ - . THE AO HAS DISALLOWED THE CLAIM ON THE PLEA THAT IT WAS IN THE NATURE OF CAPITAL EXPENDITURE . HOWEVER, THE CIT(A) CONFIRMED THE SAME ON THE PLEA OF PERSONAL ELEMENT. FROM THE RECORD WE FOUND THAT THE ASSESSEE HAS CLAIMED THE COST OF PAINTING UNDER RULE 9A OF THE I.T.RULES, 1962, ACCORDING TO WHICH COST OF PRODUCTION OF A FEATURE FILM IS ALLOWED AS DEDUCTION WHILE COMPUTING THE PROFIT AND GAINS OF BUSINESS AND PROFESSION . THE SAID COST OF PRODUCTION IS DEFINED IN THE EXPLANATION TO CLAUSE (1) OF RULE 9A, WHICH STATES AS UNDER : ITA 2591 & 2592 / M/ 1 3 8 COST OF PRODUCTION, IN RELATION TO A FEATURE FILM, MEANS THE EXPEND ITURE INCURRED ON THE PRODUCTION OF THE FILM, NOT BEING - (A) THE EXPENDITURE INCURRED FOR THE PREPARATION OF THE POSITIVE PRINTINGS OF THE FILM ; AND (B) THE EXPENDITURE INCURRED IN CONNECTION WITH THE ADVERTISEMENT OF THE FILM AFTER IT IS CERTIFIED FOR REL EASE BY THE BOARD OF FILM CENSORS:] THUS, AS PER THE ABOVE DEFINITION, EACH AND EVERY EXPENDITURE INCURRED ON THE PRODUCTION OF THE FILM IS ALLOWED AS A DEDUCTION PROVIDED IT IS NOT COVERED UNDER (A) AND (B). 13. RULE 9A IS A COMPLETE CODE IN ITSELF. THE EXPENDITURE INCURRED ON THE PRODUCTION OF FILM IS ALLOWED ONLY UNDER RULE 9A. S UCH EXPENDITURE IS ALLOW ABLE AS PER THE PROVISIONS OF RULE 9A, IRRESPECTIVE OF THE YEAR IN WHICH SUCH EXPENDITURE IS INCURRED AND IRRESPECTIVE WHETHER IT IS CAPITAL IN NATURE O R REVENUE IN NATURE. UNLIKE SECTION 37(1) OF THE ACT, RULE 9A DOES NOT LAY DOWN ANY SUCH RESTRICTIONS. ONCE IT IS ESTABLISHED THAT PAINTINGS ARE A PART OF COST OF PRODUCTION, THE SAME SHOULD BE ALLOWED AS DEDUCTION. 14. THE OBSERVATION OF THE CIT(A) TO TH E EFFECT THAT PAINTINGS WAS FOR PERSONAL USAGE IS NOT BASED ON ANY EVIDENCE ON RECORD. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 94,53,684/ - ON ACCOUNT OF EXPENDITURE INCURRED ON PURCHASE OF PAINTINGS. 15. AS T HE GROUND NO.6 HAS BEEN ALLO WED, GROUND NO.7 TAKEN BY ASSESSEE FOR ALLOWING DEPRECIATION OF COST OF PAINTINGS, WITHOUT PREJUDICE TO GROUND NO.6, HAS BECOME INFRUCTUOUS. 16. IN GROUND NOS.8 TO 13, ASSESSEE IS AGGRIEVED FOR ADHOC DISALLOWANCE OF 15% ON VARIOUS EXPENSES INCURRED FOR TH E MOVIE KAVI ALVIDA NA KEHNA, WHICH ARE CONFIRMED BY THE CIT(A). T HESE DISALLOWANCE WERE MADE BY THE AO FOR THE REASON THAT THE VARIOUS RECORDS RELATED TO PRODUCTION IN THE FORM OF CONTINUITY REPORTS, CALL SHEETS, REHEARSAL BOOK ETC. WERE NOT PRODUCED. ITA 2591 & 2592 / M/ 1 3 9 17. THE AO HAS DISCUSSED THE ISSUE AT PARA 9. I T WAS EXPLAINED BEFORE THE A.O. THAT THESE DOCUMENTS ASKED BY THE AO ARE PREPARED AT THE TIME OF SHOOTING OF THE FILM AND THE SAME ARE DESTROYED ONCE THE PRODUCTION ACTIVITY IS COMPLETED. IT WAS ALSO EXPLAINED THAT THESE DOCUMENTS DO NOT PROVIDE ANY FINANCIAL DATA WHICH WOULD BE HELPFUL IN JUSTIFYING THE CLAIM OF EXPENSES UNDER VARIOUS HEADS. IT IS ONLY BILLS AND VOUCHERS WHICH WOULD SERVE THE PURPOSE OF VERIFYING THE EXPENSES AND ACCORDINGLY, ALL THE BILLS AND VOUCHERS WERE PRODUCED FOR VERIFICATION. HOWEVER, THE AO DID NOT AGREE WITH THE ASSESSEES CONTENTION AND MADE AN ADHOC DISALLOWANCE OF 15% OF EXPENDITURE INCURRED ON JUNIOR ARTISTS AND TECHNICIANS, COSTUMES AND DRESSES, MAKEUP AND HAIRDRESSERS, DUBBING, SOUND RECORDING, DANCERS AND DANCE EXPENSES , SETTING EXPENSES ETC . 18. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE DISALLOWANCE, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 19. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT EXPEN SES 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 B Y THE A.O. ARE NOT MENTIONED IN THE LIST PRESCRIBED UNDER 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 DISALLOWAN CE 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 ASSES SE E , ON THE BASIS OF WHICH EXPENDITURE HAS BEEN RECORDED IN BOOKS, ARE BO GUS. FURTHER, A CLEAR FINDING 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 WHIC H IS ITA 2591 & 2592 / M/ 1 3 10 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 TH E 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 ASSESS E E ALONGW ITH BILLS/ VOUCHERS WERE PRODUCED' AND AGAIN AT PAGE 15 STATING THAT 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSE E HAS PRODUCED VARIOUS DETAILS/ VOUCHERS/ B ILLS ETC. FOR VERIFICATION'. IT IS NOT THE CASE OF THE A. O . THAT THE EXPENSES 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 INSTANT 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 BY THE TRIBUNAL I N THE CASE OF M/S DHARMA 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 PRODUCTION OF FILM S WERE NOT PRODUCED BY THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADHOC DISALLOWANCE SO MADE. 21. AS THE FACTS AND CIRCUMSTANCES DURING THE ASSESSMENT YEAR 2009 - 2010 ARE PARI MATERIA , FOLLOWING THE REASONING GIVEN HEREINABOVE, WE RESTRICT THE DISALLOWANCE OUT OF THE MOTOR CAR EXPENSES AND DEPRECIATION ON MOTOR CAR TO THE EXTENT OF 5%. THE ADHOC DISALLOWANCE MADE OUT OF COSTUMES AND DRESSES EXPENSES ARE HEREBY DELETED. THE DISALLOWANCE MADE ON ACCOUNT OF TELEPHONE EXPENSES IS RESTRICTED TO 5 %. IN THE SELLING EXPENSES THERE IS NO PERSONAL ITA 2591 & 2592 / M/ 1 3 11 ELEMENT, ACCORDINGLY, WE DO NOT FIND ANY MERIT FOR ADHOC DISALLOWANCE OF 10% AMOUNTING TO RS.1,44,009/ - OUT OF SELLING EXPENSES OF RS.14,40,009/ - INCURRED BY THE ASSESSEE. 2 2 . IN THE RESULT BOTH APPEALS OF TH E ASSESSEE ARE ALLOWED IN PART, IN TERMS INDICATED HEREIN ABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON 15/04/ 2015 . 15/04/2015 SD/ - SD/ - ( SANJAY GARG ) ( R.C. SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15/04 / 2015 . . ./ RK , SR. PS /PKM,PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) CONCERNED , , MUMBAI 4. / CIT - CONCERNED , MUMBAI 5. , , / DR, ITAT, MUMBA I E BENCH 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASS TT. REGISTRAR) , / ITAT, MUMBAI