LATE SHRI JHAMU SUGHAND, THROUGH LEGAL HEIR SMT PUSHPA J SUGHAND, MUMBAI V. ITO 11(1)(2), MUMBAI

ITA 271/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2893 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: J
• Next Hearing Date: 24-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 09-01-2013
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO
• Assessee Lawyers: PRASAD RAO
• Keywords: Bad and doubtful debts; Revenue expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI SANDEEP GOSAIN , J M ./ ITA NO . 2 71 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 05 - 20 06 ) (LAT E) SHRI JHAMU SUGHAND, THROUGH LEGAL HEIR, SMT. PUSHPA J. SUGHAND, 17/6, RAMAKRISHNAN CHS, GULMOHAR CROSS ROAD NO. 12 , JVPD SCHEME, MUMBAI - 400049 VS. ITO - 11(10(2), MUMBAI ./ ./ PAN/GIR NO. : A A JPS 0695 L ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI PRASAD RAO /REVENUE BY : SHRI SHRIKANT NAMDEO / DATE OF HEARING : 1 9 / 10 / 2015 / DATE OF PRONOUNCEMENT 21/10 /2015 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A) , MUMBAI , DATED 31 - 12 - 2012 , FOR THE ASSESSMENT YEAR 20 05 - 06 , IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S.254 OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AG GRIEVED FOR DISALLOWANCE OF INTEREST OF RS. 8,08,549/ - ON THE PLEA THAT INTEREST BEARING FUNDS WAS DIVERTED TO THE NON - BUSINESS PURPOSES. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWANCE OF AMOUNT OF RS.17,79,000/ - WRITTEN OFF DURING THE YEAR. 3. RIVAL CONT ENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF PRODUCER, DISTRIBUTORS AND FINANCIER OF FILMS. THE DISALLOWANCE OF INTEREST SO MADE IN ITA NO. 271/2013 2 THE ORIGINAL ASSESSMENT ORDER WAS RESTORED BY THE IT AT VIDE ITS ORDER DATED 22 - 9 - 2010 WITH A DIRECTION TO VERIFY THE FACTUAL CONTENTION , THE NATURE OF ADVANCES GIVEN AND THE AVAILABILITY OF THE INTEREST FREE FUNDS. IN THE SET ASIDE PROCEEDINGS, THE AO HAS CONFIRMED THE DISALLOWANCE. 4. LD. AR DREW OUR ATT ENTION TO THE NON - INTEREST BEARING FUNDS OF RS. 19.16 CRORES, AGAINST WHICH ASSESSEE HAS MADE THE IMPUGNED ADVANCES. 5. FROM THE RECORD, WE FOUND THAT THE ASSESSEE IS A FILM FINANCER, PRODUCER AND DISTRIBUTOR AND ALL THE ASSETS AND CORRESPONDING LIABILIT IES ARE RELATABLE TO COMMERCE, TRADE AND BUSINESS AND AS SUCH, THERE IS NO DIVERSION OF FUNDS WHATSOEVER FOR ANY PERSONAL OR NON - BUSINESS PURPOSE, NOR ARE THERE ANY NON - BUSINESS ADVANCES OR ANY NON - BUSINESS ADVANCE TO ANY SISTER CONCERN. FURTHERMORE, THE N ON - INTEREST BEARING FUNDS AVAILABLE IN BUSINESS ARE RS.1917 LACS AS AGAINST ALLEGED NON - INTEREST BEARING BUSINESS ADVANCES OF RS.1391 LACS. AS SUCH, THERE IS NO NEXUS TO INTEREST BEARING BORROWED FUNDS WITH NON - INTEREST BEARING BUSINESS ADVANCES. IN ANY CA SE NON - INTEREST BEARING FUNDS AVAILABLE IN BUSINESS ARE LARGER THAN NON INTEREST BEARING BUSINESS ADVANCES. ACCORDINGLY, NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE IS WARRANTED. THE ADVANCES SO MADE WAS IN THE COURSE OF BUSINESS AND FOR THE PURPOSE OF BUSINESS . W HATEVER INTEREST BEARING LOANS WAS TAKEN BY THE ASSESSEE, THAT WAS FOR THE PURPOSE OF ASSESSEES BUSINESS OF FILM PRODUCTION AND FINANCIER. SINCE THE ADVANCE WAS GIVEN FOR THE PURPOSE OF BUSINESS, NO ITA NO. 271/2013 3 DISALLOWANCE OF INTEREST IS WARRANTED, MO RE PARTICULARLY WHEN THE ASSESSEE WAS HAVING SUFFICIENT NON - INTEREST BEARING FUNDS. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF INTEREST. 6 . WITH REGARD TO ASSESSEES CLAIM OF BAD DEBT WRITTEN OFF, WE FOUND THAT ADVANCE WAS GIVEN BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS OF FILM DISTRIBUTION AND SHOWN IN THE BALANCE SHEET AS SUCH AND ALSO ASSESSED AS SUCH YEAR AFTER YEAR. 7 . FROM THE RECORD WE FOUND THAT SIMILAR ADVANCES WAS GIVEN BY THE ASSESSEE COMPANY AND WRITTEN OFF IN THE BOOKS AS NOT RECOVERABLE , WAS ALLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITS ORDER DATED 29 - 8 - 2012, PASSED IN ITA NOS.7803&7804/MUM/2011 FOR THE ASSESSMENT YEAR 2006 - 07 & 2007 - 08 . AS THE NATURE OF ADVANCE IS SAME, RESPECTFULLY FOLLOWING THE ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY MERIT FOR THE DISALLOWANCE OF ASSESSEES CLAIM OF BAD DEBTS WRITTEN OFF. THE ASSESSEES CASE IS ALSO SUPPORTED BY THE RECENT CBDT CIRCULAR NO. 16/2015, DATED 6 - 10 - 2015, WHEREIN IT IS PROVIDED THAT THE CO ST OF PRODUCTION OF AN ABANDONED FEATURE FILM IS TO BE TREATED AS REVENUE EXPENDITURE AND ALLOWED AS PER THE PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT. IN THIS CASE ALSO, THE ADVANCES WERE GIVEN IN RESPECT OF FILM WHICH WAS ABANDONED, THEREFORE, THE A DVANCES COULD NOT BE RECOVERED AND CLAIMED BY THE ASSESSEE BY WRITING OFF THE SAME. WE DO NOT FIND ANY JUSTIFICATION FOR DECLINE OF ASSESSEES CLAIM OF WRITTEN OFF OF BAD DEBTS. ITA NO. 271/2013 4 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN TH E OPEN COURT ON THIS 21/10 / 201 5 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 21/10 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//