ITO, New Delhi V. M/s. Kyjol Entertainment Media Pvt. Ltd., New Delhi

ITA 4320/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69712 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 10-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2010
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Business expenditure
• Section: 115JB; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4320 /DEL/ 2010 ASSESSMENT YEAR: 2007 - 08 ITO WARD - 5(3) ROOM NO. 409 - A, C. R. BUILDING, NEW DELHI VS. KYJOL ENTERTAINMENT MEDIA PVT. LTD., OFFICE FLOOR, HOTEL CROWN PLAZA, NEW DELHI PAN AACCK5184C (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI S. N. BHATIA , SR. DR RESPONDENT BY: SATISH KHOSLA , ADV. O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - VIII , NEW DELHI DATED 06.08.2010 , FOR THE ASSESSMENT YEAR 2007 - 08 . 2. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS: - 1. THE ORDER OF THE LE ARNED CIT(APPEALS) IS ERRONEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT( APPEALS) HAS ERRED IN RESTRICTING THE DELETION BUSINESS EXPENSES TO RS. 15,23,026/ - AS AGAINST RS. 25,23,026/ - MADE BY THE A.O. WHEN THE ASSESSEE DID NOT CARRY OUT ITS REGULAR BUSINESS ACTIVITIES. 2.1 THE LD CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT S THAT THE DISALLOWANCE WAS CORRECTLY MADE BY THE A.O. AFTER ALLOWING THE STATUTORY EXPENSES. THE LD. CIT(A) ALSO ERRED IN ALLOWING THE BUSINESS OF RS. 10,00,00/ - ON AD - HOC BASIS. PAGE NO. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNE D CIT(APPEALS) HAS ERRED IN DIRECTING THE A.O. TO CALCULATE TAX U/S 115JB AFTER TAKING BOOK PROFIT OF RS. 83,86,126/ - AS AGAINST RS. 99,07,497/ - . 3.1 THE LD CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE BOOK PROFIT WAS CORRECTLY CALCULATED BY THE A.O. AFTER ALLOWING THE STATUTORY EXPENSES AND DISALLOWING THE NO ALLOWABLE BUSINESS EXPENSES. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO THE ALTER, OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. . 3. APROPOS DELETION OF BUSINESS EX PENSES TO RS. 15 ,23,026/ - AS AGAINST RS. 25,23,026/ - MADE BY THE ASSESSING OFFICER WHEN THE ASSESSEE WAS NOT CARRYING OUT ITS REGULAR BUSINESS ACTIVITIES. 4. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MEDIA ENTERTAINM ENT AND FILM PRODUCING ; AND HAD FILED RETURN OF INCOME ON 31.10.2007 DECLARING LOSS OF RS. 10,24,303/ - ; AND INCOME OF RS. 44,96,507/ - UNDER SECTION 115JB OF THE INCOME - TAX ACT (HEREINAFTER THE ACT). DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSI NG OFFICER NOTICED THAT DURING THE RELEVANT ASSESSMENT YEAR THE COMPANY HAS SHOWN INCOME ONLY FROM DIVIDEND RS. 53,66,892.55/ - AND INTEREST ON DEPOSIT RS. 4,20,824/ - , PROFIT ON SALE OF ASSETS RS. 4,84,446/ - AND PROFIT ON SALE OF UNITS RS. 4 6,36,990/ - . THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT AS THE ASSESSEE COMPANY HAS NOT SHOWN ANY INCOME CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION, SO NO EXPENSES UNDER SECTION 28 TO 44 OF THE ACT WERE ADMISSIBLE IN ITS CA SE AND ACCORDINGLY, HAVING ALLOWED EXPENSES OF RS. 15,000/ - AND RS. 24,000/ - BEING ROC FEE AND AUDITORS REMUNERATION RESPECTIVELY, ALL THE OTHER EXPENSES CLAIMED BY THE ASSESSEE WERE DISALLOWED. 5. BEING AGGRIEVED BY THE AFORESAID ORDER OF THE LD ASSESSIN G OFFICER THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO AFTER TAKING INTO CONSIDERATION THE TOTALITY OF CIRCUMSTANCES RESTRICTED THE CLAIM OF EXPENSES OF THE ASSESSEE COMPANY TO RS. 10,00,000/ - AND THUS RESULTING IN DISALLOWANCE OF EXP ENDITURE CLAIMED BY THE ASSESSEE TO THE TUNE OF RS. 15,23,026/ - WAS CONFIRMED AGAINST THE ASSESSEE . 6. AGGRIEVED BY THE SAID DELETION OF RS. 10,00,000/ - MADE BY THE LD CIT(A), THE REVENUE IS BEFORE US. THE LD DR CONTENDED THAT THE LD CIT(A) HAS ERRED IN LAW BY PAGE NO. 3 RESTRICTING THE CLAIM OF THE ASSESSEE COMPANY TO AN AD - HOC AMOUNT OF RS. 10,00,000/ - WAS WITHOUT ANY BASIS AND THEREFORE THE ORDER OF THE LD CIT(A) MAY BE SET ASIDE AND THE ASSESSING OFFICERS ORDER MAY B E RESTORED. ON THE OTHER HAND THE LD AR RELIED ON THE ORDER OF LD CIT(A). 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE RECORDS. WE NOTICE THAT THE ASSESSEE COMPANY HAD CREDIT ED TO ITS PROFIT AND LOSS ACCOUNT AN INCOME OF RS. 1,09,09,153/ - BEING DIVIDEND RS . 53,66,892/ - , INTEREST ON DEPOSITS RS. 4,20,824/ - , PROFIT ON SALE OF ASSETS RS. 4,84,446/ - AND PROFIT ON SALE OF UNITS RS. 46,36990/ - ; AS AGAINST RETURNED INCOME OF RS. 20,87,966/ - FOR THE AY IMMEDIATELY PRECEDING YEAR. THE LD CIT(A) OBSERVED THAT FROM A PERUSAL OF THE PROFIT AND LOSS ACCOUNT IT REVEALS THAT AS AGAINST THE INCOME OF RS. 1,09,09,153/ - THE ASSESSEE HAS CLAIMED A TOTAL EXPENDITURE OF RS. 25,23,026/ - . THE EXPENDITURE CLAIMED BY THE ASSESSEE COMPANY MAINLY CONSISTS OF SALARY AND OTHER ALLOWAN CE RS. 16,68,000 / - ; WHEREAS IN THE FY 2005 - 06 IT WAS ONLY RS. 3,88,000/ - ; THE TRAVELLING EXPENSES COMES TO RS. 1,66,306/ - , WHEREAS IN FY 2005 - 06 IT WAS NIL; AND FOR CONVEYANCE IN THE RELEVANT FY IT WAS RS. 60,480/ - ; WHEREAS IN THE FY 2005 - 06 IT WAS NIL . T HOUGH THE ASSESSEE COMPANY S MAIN ACTIVITY IS NAMELY BUSINESS OF FILM PRODUCTION AND ENTERTAINMENT IN MEDIA INDUSTRY , THE SAID ACTIVITIES ARE YET TO BEGIN . THEREFORE, THE LD CIT(A) OBSERVED THAT THE ABNORMAL INCREASE IN EXPENDITURE FOR THE RELEVANT ASSESSMENT YEAR WAS ON ACCOUNT OF SALARY AND PERQUISITES AND TRAVELLING EXPENSES AND IT WAS NOT JUSTIFIABLE AND NOTED THAT IN THE FY 2005 - 06 IT SPENT ONLY RS. 3,88,000/ - WHEREAS , IN THE RELEVANT AY THE EXPENDITURE HAS INCREASE D MORE THAN FOUR TIMES TO THE TUNE OF RS. 16,68,000/ - . THE LD CIT(A) HAS ALSO NOTED THAT THE EXPENSES INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF SALARY AND PERQUISITES DISBURSED TO IT WAS OWN DIRECTORS . TAKING INTO CONSIDERATION THESE FACTS LD CIT(A) RESTR ICTED THE CLAIM OF THE ASSESSEE COMPANY TO RS. 10,00,000/ - AND CONFIRM ED THE DISALLOWANCE OF EXPENDITURE TO THE TUNE OF RS. 15,23,026/ - . ON AN ENQUIRY TO THE LD AR, WE FIND THAT THE ASSESSEE HAS NOT PREFERRED ANY APPEAL AGAINST THE SAID DISALLOWANCE OF RS. 15,23,026/ - . TAKING INTO THE CONSIDERATION OVERALL FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAID DISCRETION EXERCISED BY THE LD CIT(A). THEREFORE, THIS GROUND OF THE REVENUE FAILS AND WE CONFIRM THE ORDER OF THE LD CIT(A). PAGE NO. 4 8. APROPOS LD CIT(A)S DIRECTION TO THE ASSESSING OFFICER TO CALCULATE TAX U/S 115JB AFTER TAKING INTO ACCOUNT THE PROFIT BEFORE TAX OF RS. 83,86,126/ - AS AGAINST RS. 99,07,497/ - IS WRONG. 9. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE CO MPANY WAS FORMED TO DO BUSINESS IN MEDIA ENTERTAINMENT AND FILM PRODUCTION BUT IT COULD NOT DO THE SAID BUSINESS BECAUSE FILM PRODUCTION REQUIRED SUBSTANTIAL INVESTMENT WHICH COULD NOT BE ARRANGED IN THE RELEVANT ASSESSMENT YEAR . AS SUCH IT WAS ENGAGED IN INVESTMENT S IN MUTUAL FUNDS/ FIXED DEPOSITS. IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLARING LOSS OF RS. 10,24,303/ - AND INCOME OF RS. 44,96,507/ - U/S 115JB OF THE ACT. HOWEVER, THE ASSESSING OFFICE R , ASSESSED THE BOOK PROFIT U/S 115JB OF AT RS. 55,03,261/ - AS AGAINST RS. 44,96,507/ - DISCLOSED IN THE RETURN OF INCOME. 10. AGGRIEVED BY THE SAID ORDER OF THE ASSESSING OFFICER THE ASSESSEE FILED AN APPEAL BEFORE LD CIT(A) WHO GAVE THE IMPUGNED DIRECTIO N TO CALCULATE TAX U/S 115JB AFTER TAKING INTO ACCOUNT THE PROFIT OF RS.83,86,126/ - AS AGAINST RS. 99,07,497/ - . 11. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE REVENUE IS BEFORE US. THE LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER , WHEREAS ON T HE OTHER HAND LD COUNSEL FOR THE ASSESSEE CONTENDED THAT WHILE LEVYING TAX U/S 115JB OF THE ACT, THE BOOK PROFIT HAS TO BE COMPUTED IN TERMS OF PROVISIONS OF THE SAID SECTION ONLY AND INCOME CALCULATED IN TERMS OF NORMAL PROVISIONS OF THE ACT, CANNOT SUBST ITUTE THE BOOK PROFIT AS COMPUTED UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT AND SUPPORTED THE DECISION OF LD CIT(A) AND CONTENDED THAT THE LD CIT(A) HAS CORRECTLY DIRECTED THE ASSESSING OFFICER IN THIS RESPECT. 12. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT WHILE COMPUTING THE PROFIT U/S 115JB OF THE ACT, THE ASSESSING OFFICER HAS ADOPTED THE NET PROFIT AS PER THE TAXABLE INCOME COMPUTED IN TERMS OF THE NORMAL PROVISION OF ACT . THE LD CIT(A) HAS ALSO MADE A FINDI NG IN THIS RESPECT THAT THE ASSESSING OFFICER WHILE ARRIVING AT THE IMPUGNED BOOK PROFIT OF RS. 55,03,261/ - COMPUTED IT AS PER THE NORMAL PROVISIONS OF THE ACT .IT IS TO BE NOTED THAT SECTION 115JB OF THE ACT, IS A CODE OF ITS OWN AND THEREFORE THE BOOK PRO FIT CONTEMPLATED IN THAT SECTION HAS TO BE COMPUTED IN TERMS OF THE PROVISIONS OF THE SAID PAGE NO. 5 PROVISION ONLY AND THEREFORE THE LD CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO TAK E INTO ACCOUNT THE PROFIT BEFORE TAX OF RS. 83,86,126/ - AND THEREAF TER INCREASE THE SAME BY THE AMOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF ASSET, NAMELY, INVESTMENT CLAIMED AT RS. 5,25,067/ - AND THEREAFTER TO ALLOW DEDUCTION ON ACCOUNT OF DIVIDEND EXEMPT ED U/S 10(35) SHOWN BY THE ASSESSEE AT RS. 44,04, 236/ - . WE DO NOT FIND ANY REASON TO INTERFERE IN THE SAID DIRECTION WHICH IS PER - SE LEGAL AND THEREFORE, THIS GROUND OF THE REVENUE ALSO FAILS. 13 . IN THE RESULT THE APPEAL PREFERRED BY THE REVENUE IS DISMISSED AND WE CONFIRM THE ORDER OF THE LD CIT(A). ORDER PRON OUNCED IN THE OPEN COURT ON 3 1 .12.2013. - S D / - - S D / - ( J. S REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 3 1 /12 /2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI