, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI . , , !' ! . . #$% & '() , ' BEFORE SHRI D MANMOHAN, VICE PRESIDENT & SHRI N K B ILLAIYA, AM ' ./ ITA NO.2912/MUM/2013 * '+* / ASSESSMENT YEAR 2007-08 SHRI JACKIE SHROFF 1401 VASTU TOWERS CO-OP HSG SOC., BANDSTAND ROAD, BANDRA (W), MUMBAI- 400 050 PAN AAJPS6596A VS. ITO 11(1)(2), MUMBAI ( ,- /APPELLANT) ( ./,- /RESPONDENT) APPELLANTS BY : SHRI JITENDRA JAIN RESPONDENT BY : SHRI VIVEK A PERAMPURNA ' ' 0 1& / DATE OF HEARING :13.01.2015. 2+ 0 1& / DATE OF PRONOUNCEMENT :16.01.2015 (3 (3 (3 (3 / O R D E R PER N K BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-3, MUMBAI, DATED 03.09.2010 PERTAINING TO A.Y. 2007-08 . THE ASSESSEE HAS RAISED EIGHT SUBSTANTIVE GROUNDS OF APPEAL. 2. GROUND NO.1 RELATES TO THE ADDITION OF RS.1,00,6 1,000/- ON ACCOUNT OF THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. THIS ISSUE IS NO MORE RES INTEGRA AS THE TRIBUNAL IN ASSESSEES OWN CASE IN AY 2006-0 7 IN ITA NO. 7843/MUM/2010 HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. THE ITA NO.2912/MUM/2013 AY 2007-08 2 TRIBUNAL HAS FOLLOWED ITS OWN DECISION FOR A.Y. 200 5-06 QUA ITA NO. 6457/MUM/2008. THE TRIBUNAL HAS ADJUDICATED THIS I SSUE AS UNDER: 3. THE ISSUE INVOLVED IN THIS GROUND RELATES TO TH E TAXABILITY OF ADVANCES RECEIVED DURING THE YEAR BY THE ASSESSEE. THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN ITA NO. 6457/MUM/2008 AT PARA-8 PAGE-3 WHICH IS AS UNDER: WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE COUNS ELS AND ALSO PERUSED THE ORDERS OF LOWER AUTHORITIES AND TH E PAPER BOOK SUBMITTED BY THE ASSESSEE. WE FIND THAT FOR THE YEA R UNDER CONSIDERATION, THE ASSESSEE HAS OFFERED INCOME FOR THE YEAR WHICH INCLUDES AN AMOUNT OF RS. 28,48,000/- OUT OF OPENING ADVANCES TO WHICH AN AMOUNT OF RS. 53,52,000/- HAS BEEN ADDED OUT OF CURRENT YEARS ADVANCE TOTALING TO RS. 82,00,000/-. THE TOTAL ADVANCES RECEIVED DURING THE YEAR UNDER CONSIDERATION ARE AT RS. 1,10,10,062/-. WE DO NOT A GREE WITH THE SUBMISSION OF THE COUNSEL THAT SIMILAR PRACTICE HAS BEEN ACCEPTED IN THE PAST BY THE DEPARTMENT AS IN OUR CO NSIDERED VIEW THE PROVISIONS OF SEC 145 OF THE ACT HAVE BEEN AMENDED W.E.F 01.04.1997 WHERE IN IT HAS BEEN PROVIDED THAT FOR THE PURPOSES OF COMPUTING THE INCOME UNDER THE HEAD P ROFITS & GAINS OF BUSINESS OR PROFESSION THE ASSESSEE CAN F OLLOW EITHER CASH SYSTEM OR MERCANTILE SYSTEM OF ACCOUNTING THER EBY PROHIBITING THE HYBRID SYSTEM OF ACCOUNTING, WHICH THE ASSESSEE WAS FOLLOWING IN EARLIER YEARS. THE CIT[A] WHILE GI VING RELIEF TO THE ASSESSEE IN EARLIER YEARS HAS FAILED TO CONSIDE R THE AMENDMENT BROUGHT UNDER SECTION 145 OF THE ACT . WE CANNOT FOLLOW THE DECISIONS OF THE REVENUE AUTHORITIES WHI CH ARE INCONSISTENT WITH THE PROVISIONS OF SEC. 145 OF THE ACT. IN OUR CONSIDERATE VIEW, THE METHOD OF COMPUTING THE INCOM E BY THE ASSESSEE, IS FAULTY. IT IS THE CASE OF THE ASSESSEE THAT THE ADVANCES ARE TAKEN AS INCOME IN THE YEAR OF THE REL EASE OF THE FILMS WHICH IN ITSELF IS A FAULTY PRACTICE AS THE R ELEASE OF THE FILMS ARE NOT IN THE HANDS OF THE ASSESSEE AS IT IS THE SOLE PREROGATIVE OF THE PRODUCERS OF THE FILMS, WHERE AS THE ASSESSEE IS ENJOYING THE FRUITS OF THE ADVANCES FRO M THE DAY HE GETS THEM. IN THE FILM LINE, PRODUCERS SIGN ACTORS AND PAY FOR THEIR SERVICES AS PER THEIR BOX OFFICE REPUTATION, THEREFORE ANY PAYMENT RECEIVED BY THE ACTOR IS ACCORDING TO HIS U SP AT THE BOX OFFICE WHICH IS DETERMINED AT THE TIME OF THE S IGNING OF THE AGREEMENTS. WE FIND THAT DURING THE YEAR UNDER CONS IDERATION THE ASSESSEE HAS RECEIVED RS.1,10,10,062.00 OUT OF WHICH HE HAS ALREADY OFFERED RS.53,52,000.00 IN THE COMPUTAT ION OF INCOME . THE COUNSEL POINTED OUT THAT THE ASSESSEE HAS ALSO OFFERED RS 27,58,062.00 IN A.Y 2006-07 AND RS.2,50, 000.00 IN ITA NO.2912/MUM/2013 AY 2007-08 3 A.Y 2007-08 OUT OF THE ADVANCE OF RS.1,10,10,062.00 . IN OUR HUMBLE OPINION THIS ISSUE NEEDS FURTHER VERIFICATIO N AT THE ASSESSMENT STAGE, WE THEREFORE RESTORE THIS ISSUE B ACK TO THE FILES OF THE AO. THE AO IS DIRECTED TO VERIFY THE C LAIM OF THE ASSESSEE THAT HE HAS OFFERED OUT OF THE TOTAL ADVAN CE OF RS. 1,10,10,062.00, RS 27,58,062.00 IN A.Y 2006 -07 AND RS.2,50,000.00 IN A.Y 2007-08 AND IF FOUND CORRECT ONLY THE BALANCE AMOUNT SHOULD BE TAXED IN THE YEAR UNDER CONSIDERATION, TO AVOID DOUBLE TAXATION OF THE SAME INCOME . THIS WILL ALSO COVER THE DECISION OF THE DELHI BENC H IN THE CASE OF ACIT VS FOX MONDAL & CO., IN ITA 3377 / DEL / 20 06 RELIED UPON BY THE ASSESSEE. FOLLOWING OUR OWN FINDINGS, WE DIRECT THE AO VERIFY THE CLAIM OF THE ASSESSEE THAT HE HAS OFFERED OUT OF THE TOTAL A DVANCE OF RS.17931626.00, RS.9758062.00 IN AY 06-07, AND IF F OUND CORRECT ONLY THE BALANCE AMOUNT SHOULD BE TAXED IN THE YEAR UNDE R CONSIDERATION. GROUND NO.1 WITH ITS SUBGROUNDS ARE ALLOWED FOR STA TISTICAL PURPOSES. RESPECTFULLY FOLLOWING OUR OWN DECISIONS, WE DIRECT THE AO ACCORDINGLY. GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 3. GROUND NO.2 RELATES TO THE DISALLOWANCE OF INTER EST OF RS.18,58,938/- THIS ISSUE IS ALSO COVERED BY THE DECISION OF THE TRIBUN AL IN ITA NO. 7843/MUM/2010 FOR A.Y. 2006-07, WHEREIN THIS ISSUE HAS BEEN CONSIDERE D AT PARA 8, WHICH READS AS UNDER: 8. WE HAVE PERUSED THE ORDER OF THE TRIBUNAL. WE FI ND THAT AT PAGE-8 PARA-23, THE TRIBUNAL HAS HELD AS UNDER: WE HAVE CONSIDERED THE ARGUMENTS FROM BOTH PARTIES . WE FIND THAT THE MONEY HAS BEEN BORROWED IN EARLIER YEARS. ALTHO UGH THE AO HAS MENTIONED THAT THE AMOUNT AS BEEN BORROWED FOR PERS ONAL USAGE BUT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTI ATE HIS CLAIM. FURTHER, THE ASSESSEE BEING A FILM STAR HAS TO MAIN TAIN A CERTAIN SET OF STANDARD OF LIVING FOR WHICH HE MAY REQUIRE MONEY F ROM TIME TO TIME. EVEN IF ASSUMING THAT THE ASSESSEE HAS BORROWED MON EY TO PURCHASE LUXURIOUS CAR, THAT WOULD JUSTIFY LOOKING TO THE NA TURE OF PROFESSION OF ASSESSEE. CONSIDERING ALL THESE FACTS INTO TOTALITY , WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE DR, FINDINGS OF THE LD. CIT(A) ARE ACCORDINGLY CONFIRMED. GROUND NO. 2 OF REVENUES AP PEAL IS DISMISSED. ITA NO.2912/MUM/2013 AY 2007-08 4 FOLLOWING OUR OWN FINDING IN ITA NO. 6457/M/08, GRO UND NO. 2 WITH ITS SUB-GROUNDS ARE ALLOWED. RESPECTFULLY FOLLOWING OUR OWN DECISION, GROUND NO. 2 IS ALLOWED. 4. GROUND NOS. 3 TO 8 RELATES TO THE DISALLOWANCE O UT OF EXPENDITURES. THIS ISSUE WAS ALSO CONSIDERED BY THE TRIBUNAL IN A.Y. 2 006-07 IN ITA NO. 7843/MUM/2010 AT PARA 9 OF ITS ORDER AND AT PARA 11 IT HAS HELD AS UNDER: 11. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTE NTION TO PAGE-8 OF THE PAPER BOOK WHICH IS COMPUTATION OF INCOME FOR T HE YEAR UNDER CONSIDERATION. WE FIND THAT THE ASSESSEE HAS HIMSEL F DISALLOWED A SUM OF RS. 2,58,942/- BEING EXPENSES ON PERSONAL NATURE AND HAS FURTHER DISALLOWED RS. 95,661/- U/S. 40A(3) OF THE ACT. CON SIDERING THE NATURE OF PROFESSION OF THE ASSESSEE, BEING AN ACTOR IN SH OW BUSINESS, WE DO NOT FIND ANY REASON FOR FURTHER DISALLOWANCES OF EX PENSES MORE SO WHEN THE ASSESSEE HIMSELF HAS DISALLOWED RS. 2,58,9 42/-+RS. 95,661/- SUO MOTU IN ITS COMPUTATION OF INCOME. THEREFORE, A DHOC DISALLOWANCES AS QUESTIONED IN GROUND NOS. 3 TO 7 A RE DIRECTED TO BE ALLOWED AS DEDUCTION FOR THE YEAR UNDER CONSIDERATI ON. GROUND NOS 3 TO 7 ARE ACCORDINGLY ALLOWED. GROUND NOS. 3 TO 8 ARE ACCORDINGLY ALLOWED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2015. SD/- SD/- (D MANMOHAN) (N K BILLAIYA) /VICE PRESIDENT & & & & '() '() '() '() / ACCOUNTANT MEMBER MUMBAI; 5( DATED : 16 TH JANUARY, 2015. SA ITA NO.2912/MUM/2013 AY 2007-08 5 (3 (3 (3 (3 0 00 0 .1# .1# .1# .1# 6#+1 6#+1 6#+1 6#+1 / COPY OF THE ORDER FORWARDED TO : 1. ,- /THE APPELLANT. 2. ./,- / THE RESPONDENT. 3. 7 ( ) / THE CIT(A), MUMBAI. 4. 7 / CIT 5. #'89 .1 , , / DR, J BENCH, ITAT, MUMBAI (3 ' / BY ORDER, '/#1 .1 //TRUE COPY// / ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI