ITO 11(1)(1), MUMBAI V. ABDUL G. NADIADWALA, MUMBAI

ITA 2896/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3440 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Question of law

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 2896/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 THE ITO 11(1)(1), ROOM NO.436A, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 % % % % / VS. MR. ABDUL G. NADIADWALA, EMPIRE HOUSE, 1 ST FLOOR, 10, SHAH INDUSTRIAL ESTATE, VEERA DESAI ROAD, ANDHERI (W), MUMBAI -53 ' '# ./ ( ./ PAN/GIR NO. : AAAPN 5162A ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , ' / APPELLANT BY: SHRI MANOJ KUMAR *+') - , ' / RESPONDENT BY : SHRI SANJIV M. SHAH % - .# / DATE OF HEARING : 12/06/2013 / & - .# / DATE OF PRONOUNCEMENT : 12/06/2013 '0 / O R D E R PER I.P.BANSAL,J.M: THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST ORDER PASSED BY LD. CIT(A)-3, MUMBAI DATED 13/1/2011 FOR THE ASSESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A)-3, MUMBAI ERRED IN DELETING ADDITION OF RS.6 0.00 LACS WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE INCURRED ON AN ABANDONED FILM IS IN THE NATURE OF A CAPITAL LOSS AND NOT A LOSS WHIC H IS REVENUE IN NATURE AS AN INCOMPLETE FILM IS IN THE NATURE OF CAPITAL WORK I N PROGRESS. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT(APPEA LS) ON THE ABOVE GROUNDS TO SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF HIRIN G OF CINE EQUIPMENTS, DISTRIBUTION OF FILMS AND EXPORT OF FILMS. HE CLA IMED LOSS OF RS.60.00 LACS IN RESPECT OF ABANDONED FILM LOVE JUNCTION. THE A .O DISALLOWED THE SAID LOSS ON ./ I.T.A. NO. 2896/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 2 ACCOUNT OF NON ADVANCING OF ANY LEGAL JUSTIFICATION FOR ALLOWANCE OF THE CLAIM. IN THE ORDER PASSED BY LD. CIT(A) THE FACTS ARE NARRAT ED AS FOLLOWS: IT HAS BEEN SUBMITTED THAT APPELLANT WAS IN THE B USINESS OF PRODUCTION AND DISTRIBUTION OF CINEMATOGRAPHIC FILMS. HE HAD ENTE RED INTO AN AGREEMENT WITH A.H.N. PRODUCTION FOR ACQUIRING WORLDWIDE RIGHTS OF THE FILM LOVE JUNCTION AND RS.60 LAKHS WAS PAID OVER A PERIOD OF TIME AS APPEL LANTS INVESTMENT. HOWEVER, THE PROJECT HAD TO BE SHELVED HALF WAY AS THE HERO INDE R KUMAR MET WITH A SERIOUS ACCIDENT DURING SHOOTING OF ONE OF HIS OTHER FILM A ND SHOOTING SCHEDULES GOT DISRUPTED FOR A LONG TIME. BY THE TIME, SHOOTING R ESUMED THE HERO HAD LOST HIS DRAW AT BOX OFFICE BECAUSE HIS OTHER FILM BOMBED. FURTH ER, THE HEROINE AYESHA JULKA GOT MARRIED WHICH PROVED ANOTHER DRAWBACK AND THE FILMS DIRECTOR (ESMAYEEL SHROFF) TURNED OUT TO BE NEGATIVE EFFECT AS HIS OTHER FILM HAD NO BUYERS, EVEN THE SATELLITE CHANNELS WERE NOT READY AND THE MUSIC COMPANY WITH WHOM THE PRODUCER WAS NEGOTIATING BACKED OUT. THE PROJECT BECAME A DEAD H ORSE AND APPELLANT AND PRODUCER AFTER CONSIDERING ALL ASPECTS AND MARKET T RENDS CONCLUDED THAT PROJECT HAD NO VIABILITY. INSTEAD OF INCREASING FURTHER LOSS, T HEY DECIDED TO SHELVE THE PROJECT AND WRITE OFF THE AMOUNTS ADVANCED/INCURRED. AS ON THE DATE OF SCRAP I.E.L7TH FEB. 06 THE PRODUCER HAD INCURRED COST OF RS.1.06 CRORE S OUT OF WHICH APPELLANTS SHARE WAS RS. 60 LAKHS. 3. ON THESE FACTS, LD. CIT(A) RELYING UPON SEVERAL DECISIONS, WHICH INTER-ALIA INCLUDES DECISIONS RENDERED BY MUMBAI ITAT HAS HE LD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF ABANDONED FILM IS ALLOWABLE. THE REVENUE IS AGGRIEVED, HENCE, FILED AFOREMENTIONED A PPEAL. 4. AT THE OUTSET IT WAS SUBMITTED BY LD. A.R THAT T HIS ISSUE IS NO MORE RES- INTEGRA AS THERE ARE SEVERAL DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT WHICH HAVE CONFIRMED THE VIEW TAKEN BY ITAT THAT EXPEN DITURE IN RESPECT OF ABANDONED FILM IS AN ALLOWABLE EXPENDITURE. REFERE NCE WAS MADE TO THE FOLLOWING DECISIONS: 1. BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS . SHRI RAJESH KHANNA IN INCOME TAX APPEAL NO.3875 OF 2010 DATED 14 TH SEPTEMBER, 2011. 2. BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V S. MUKTA ARTS PVT. LTD. IN INCOME TAX APPEAL NO.584 OF 2001 DATED 25 TH AUG.2008. 3. BOMBAY HIGH /COURT DECISION IN THE CASE OF CIT VS. M/S. A.K.FILMS PVT. LTD. IN ITX.A 1199/2010 DATED 14 TH FEB.2011. 4. BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V S M/S. DREAM MERCHANTS ENTERPRISES IN INCOME TAX APPEAL NO.4252 OF 2010. ./ I.T.A. NO. 2896/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 3 5. MUMBAI ITAT DECISION IN THE CASE OF VENUS REC ORDS AND TAPES P. LTD. IN ITA NO.6667/MUM/2011 (A.Y.2005-06) ORDER DATED 7/9/2012 . COPIES OF ALL THESE DECISIONS ARE PLACED ON OUR REC ORD AND WERE ALSO GIVEN TO LD. D.R 5. IN THIS VIEW OF THE SITUATION, AFTER HEARING BOT H THE PARTIES WE FIND THAT LD. CIT(A) DID NOT COMMIT ANY ERROR IN ALLOWING PROPER RELIEF TO THE ASSESSEE. FOR THE SAKE OF COMPLETENESS WE MAY REPRODUCE THE RELEVANT OBSERVATION HONBLE BOMBAY HIGH COURT FROM THE DECISION IN THE CASE OF CIT VS. M/S. MUKTA ARTS PVT. LTD. (SUPRA) 1. HEARD THE LEARNED COUNSEL APPEARING FOR THE AP PELLANT AND THE LEARNED COUNSEL APPEARING FOR THE RESPONDENT. 2. WE HAVE PERUSED THE ORDER OF THE INCOME TAX APPE LLATE TRIBUNAL DATED 2 ND MAY, 2001 AND ALSO THE QUESTION OF LAW SOUGHT TO BE RAISED IN THE ABOVE APPEAL WHICH READS AS UNDER: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT WAS JUSTIFIED IN HOLDING THAT THE COST OF PRODUCTION OF THE ABANDONED FILM DEVAA IS TRADING LOSS.? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT JUSTIFIED IN NOT APPRECIATING THE FACT THAT CHARACTER OF NEGATIVE FILM WHICH CANNOT BE EXHIBITED IS THAT OF THE CAPIT AL NATURE AND NOT AS STOCK- IN-TRADE? 3. AFTER HEARING THE PARTIES FOR SOME TIME, THE LE ARNED COUNSEL FOR THE APPELLANT CONCEDES THAT THERE IS NO QUESTION OF LAW INVOLVED IN THE ABOVE APPEAL AND THE APPEAL IS ACTUALLY MISCONCEIVED AND ESPECIALLY IN VIEW OF THE FACT THAT THE FILM IN QUESTION WAS ADMITTEDLY NOT RELEASED AND HENC E IT IS MERELY A STOCK IN TRADE AND THERE IS NO QUESTION OF THE SAME BEING CAPITA L ASSET. MR.SHIVRAM ALSO POINTED OUT THAT THE ASSESSING OFFICER HAS GIVEN EFFECT TO THE ORDER OF THE COMMISSIONER OF INCOME TAX. HENCE THE ABOVE APPEAL IS TOTALLY MIS CONCEIVED AND THEREFORE, STANDS DISMISSED. IN VIEW OF THE ABOVE DISCUSSIONS THE APPEAL FILED B Y THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/06/2013 . '0 - & #' 1 2%3 12/06//2013 - 4 SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 2% DATED 12/06/2013 ./ I.T.A. NO. 2896/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 4 '0 '0 '0 '0 - -- - *.56 *.56 *.56 *.56 7'6&. 7'6&. 7'6&. 7'6&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 694 *.% , , / DR, ITAT, MUMBAI 6. 4: ; / GUARD FILE. '0% '0% '0% '0% / BY ORDER, +6. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . % . .VM , SR. PS ./ I.T.A. NO. 2896/MUM/2011 ( % % % % & & & & / ASSESSMENT YEARS : 2006-07 5 DATE INITIALS 1. DRAFT DICTATED ON: 12/06//2013 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 12/06/.2013 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: