BUDDHA FILMS LTD, MUMBAI V. ITO WD 11(1)(1), MUMBAI

ITA 4426/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55685 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 23-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: K SHIVARAM
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHRI B. R. MITTAL, JM AND SHRI R. K. PANDA, AM ITA NO. : 4426/MUM/2009 ASSESSMENT YEAR : 2003-04 & ITA NO. : 4427/MUM/2009 ASSESSMENT YEAR : 2004-05 M/S. BUDDHA FILMS LTD. CONTINENTAL BUILDING, 135 DR. A. B. ROAD, WORLI, MUMBAI-400 018 PAN NO: AAACB 6838 J VS. INCOME TAX OFFICER WARD 11(1)(1), AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SHIVARAM RESPONDENT BY : SHRI P. C. MAURYA DATE OF HEARING : 1 9.10.2011 DATE OF PRONOUNCEMENT : 21.10.2011 ORDER PER R. K. PANDA (AM) : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DI RECTED AGAINST THE SEPARATE ORDERS DATED 27.11.2008 AND 01.04.2009 PAS SED BY THE LD. CIT(A)- XI, MUMBAI RELATING TO THE ASSESSMENT YEARS 2003-04 AND 2004-05 RESPECTIVELY. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 2 ITA NO. : 4426/MUM/2009 (ASSESSMENT YEAR : 2003-04) 2. THERE IS A DELAY OF 116 DAYS IN FILING OF THE AB OVE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A CONDONATION PETI TION ALONG WITH AN AFFIDAVIT REQUESTING FOR CONDONATION OF DELAY. IT H AS BEEN EXPLAINED IN THE SAID APPLICATION THAT THE ORDER OF THE LD. CIT(A) F OR THE ASSESSMENT YEAR 2003-04 WAS RECEIVED ON 29.01.2009. THE COMPANY HAS A VERY LITTLE BUSINESS ACTIVITY AND HENCE THE ACCOUNTS AND I.T. MATTERS ARE LOOKED AFTER BY A PART TIME ACCOUNTANT. THE ORDER OF THE LD. CIT (A) FOR THE ASSESSMENT YEAR 2003-04 COULD NOT BE REPORTED EITHER TO THE DI RECTORS OR THE TAX CONSULTANTS BY THE PART TIME ACCOUNTANT AND IT WAS FILED IN THE FILE. HENCE THE APPEAL COULD NOT BE FILED BEFORE THE TRIBUNAL I N TIME. ONLY WHEN THE ORDER OF LD. CIT(A) FOR THE ASSESSMENT YEAR 2004-05 RECEIVED ON 05.06.2009 WAS SENT TO THE TAX CONSULTANT, THEN ONLY IT CAME T O NOTICE OF THE DIRECTORS THAT NO APPEAL HAS BEEN FILED BEFORE THE TRIBUNAL F OR THE PRECEDING ASSESSMENT YEAR. IN VIEW OF THE ABOVE, THERE IS A R EASONABLE AND SUFFICIENT CAUSE FOR DELAY IN FILING OF THE APPEAL. 2.1 REFERRING TO THE DECISIONS OF THE HON'BLE SUPRE ME COURT IN THE CASE OF N. BALAKRISHNAN VS. KRISNAMURTHY (1998) REPORTED IN 7 SSC 123, STATE OF NAGALAND VS. LIPOK AO (2005) REPORTED IN 183 ELT 33 7 (SC) AND COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS. (1987) REPO RTED IN 167 ITR 471 (SC), HE SUBMITTED THAT IN THE LIGHT OF THE RATIO OF THE DECISIONS IN THE ABOVE CITED CASE, THE DELAY IN FILING THE APPEAL SHOULD BE COND ONE AND THE APPEAL SHOULD BE HEARD ON MERIT. 3. THE LD. DR ON THE OTHER HAND, OPPOSED THE CONDON ATION OF DELAY IN FILING OF THE APPEAL BY THE ASSESSEE. ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 3 4. AFTER HEARING BOTH THE SIDES AND AFTER CONSIDERI NG THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE, THE DELAY IN FILING OF THE APPEAL BY THE ASSESSEE IS CONDONED. 5. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THEY ALL RELATE TO THE DISALLOWANCE OF INTEREST OF `. 83,81,820/- U/S. 36(1)(III) OF THE IT ACT MADE BY THE AO AND CONFIRMED BY THE LD. CIT( A). 6. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF PROGRAMMING SERVICES AND ADVERTISEMENTS BOOKING ON CRICKETING EVENTS TELECASTING ON DOORDARSHAN. DURING THE COURS E OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE COMPANY HAS SHOWN LOSS WHICH IS MAINLY ON ACCOUNT OF FINANCIAL CHARGES. THE ASSE SSEE HAS GIVEN LOAN OF `. 7,22,43,671/- TO ZEE SPORTS LTD., BADGAMIA FILMS P. LTD. AND PRATHAM MEDIA ENTERTAINMENT P. LTD. ON WHICH NO INTEREST HA S BEEN CHARGED BY THE ASSESSEE. HOWEVER, THE ASSESSEE IS PAYING INTEREST @ 18% ON LOAN TAKEN. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST @ 18% SHOULD NOT BE CHARGED FOR THE INTEREST FREE LOAN GI VEN TO THE ABOVE PARTIES. 6.1 IT WAS EXPLAINED BY THE ASSESSEE THAT THESE LOA NS ARE IRRECOVERABLE AND WRITTEN OFF IN THE SUBSEQUENT YEARS. AS THE INT EREST IS NOT RECEIVABLE, HENCE NO INTEREST HAS BEEN CHARGED. IT WAS FURTHER SUBMITTED THAT THE INTEREST ON INTEREST FREE LOAN GIVEN TO PRATHAM MED IA ENTERTAINMENT P. LTD. AND BADGAMIA FILMS P. LTD. WORKS OUT TO `. 6,12,335/- @ 18% P.A. IT WAS SUBMITTED THAT INTEREST OF `. 6,06,725/- WAS DISALLOWED IN THE ASSESSMENT YEAR 2002-03 ALSO. AS REGARDS, THE INTEREST FREE LO AN OF `. 6,88,41,925/- TO ZEE SPORTS LTD. IS CONCERNED, IT WAS SUBMITTED THAT THE ASSESSEE IS HAVING BUSINESS SYNERGY RELATIONSHIP WITH THE SAID COMPANY AND THE LOAN HAS BEEN GIVEN OUT OF REALIZATION OF DEBTORS AND INCOME TAX REFUND ETC. THE DATE WISE CHART SHOWING THE SOURCES OF GIVING INTEREST FREE L OAN TO THE SAID PARTIES WAS ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 4 ALSO FURNISHED. IT WAS SUBMITTED THAT THE DEBTORS H AVE GONE DOWN TO `. 2.96 CRORES AS AGAINST `. 31.45 CRORES IN THE EARLIER YEAR. THESE AMOUNTS ARE INTEREST FREE INTERNAL ACCRUALS AND THE ASSESSEE HA S NOT INVESTED ANY INTEREST BEARING FUNDS FOR GIVING LOANS TO ZEE SPOR TS LTD. IN REPLY TO THE OBJECTION OF THE AO AS TO WHY THE COLLECTION FROM S UNDRY DEBTORS HAVE NOT BEEN USED FOR REPAYMENT OF LOAN TO ZEE SPORTS LTD., IT WAS SUBMITTED BY THE ASSESSEE THAT THE LOAN WAS GIVEN TO PROMOTE ITS OWN BUSINESS AND IT HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. FUR THER IT IS THE BUSINESS DECISION OF THE ASSESSEE AND THE DEPARTMENT CANNOT QUESTION THE CONDUCT OF THE ASSESSEE FOR THE PURPOSE OF BUSINESS. 7. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND DISALLOWED THE INTEREST OF `. 83,81,820/- BEING INTEREST @ 18% ON INTEREST FREE LOANS ADVANCED TO ZEE SPORTS LTD., BADGAMIA FILMS P. LTD. AND PRATHAM MEDIA ENTERTAINMENT P. LTD. 8. BEFORE THE LD. CIT(A) THE ASSESSEE DID NOT PRESS THE DISALLOWANCE OF INTEREST ON INTEREST FREE LOANS ADVANCED TO BADGAM IA FILMS P. LTD. AND PRATHAM MEDIA ENTERTAINMENT P. LTD. SO FAR AS, THE INTEREST FREE ADVANCE GIVEN TO ZEE SPORTS LTD. IS CONCERNED THE EXPLANATI ON GIVEN BEFORE THE AO WAS REITERATED. IT WAS SUBMITTED THAT THE ADVANCE G IVEN WAS FOR BUSINESS EXPEDIENCY AND OUT OF SURPLUS FUNDS AND NO BORROWED FUND HAS BEEN ADVANCED TO ZEE SPORTS LTD. HOWEVER, THE LD. CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND SUST AINED THE ADDITION MADE BY THE AO. 9. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 5 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. SO FAR AS THE DISALLOWANCE OF INTEREST O N INTEREST FREE ADVANCES GIVEN TO BADGAMIA FILMS P. LTD. AND PRATHAM MEDIA E NTERTAINMENT P. LTD. IS CONCERNED WE FIND SIMILAR DISALLOWANCE WAS MADE DURING THE ASSESSMENT YEAR 2002-03 WHICH WAS SUBMITTED BY THE ASSESSEE IT SELF BEFORE THE AO. FURTHER, THE DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCES GIVEN TO ABOVE TWO PARTIES WAS NOT PRESSED BEFORE T HE LD. CIT(A). THEREFORE, THE DISALLOWANCES OF INTEREST AMOUNTING TO `. 6,12,314/- OUT OF `. 83,81,820/- IS SUSTAINED. 10.1 SO FAR AS THE DISALLOWANCE OF INTEREST ON INTE REST FREE ADVANCE GIVEN TO ZEE SPORTS LTD. IS CONCERNED, WE FIND THE VARIOUS S UBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO AND THE LD. CIT(A) WERE COMP LETELY OVERLOOKED BY THE LOWER AUTHORITIES. THE LD. CIT(A) WITHOUT CONSIDERI NG THE VARIOUS DETAILS FURNISHED BEFORE HIM IN A VERY BRIEF, NON-SPEAKING AND CRYPTIC ORDER HAS UPHELD THE ACTION OF THE AO. WE FIND THE ASSESSEE HAD SUBMITTED BEFORE THE AO THE CHART CONTAINING THE DATE-WISE PAYMENT OF IN TEREST FREE LOAN EXPLAINING THE SOURCES THERE OF. IT IS THE SUBMISSI ON OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO PART OF INTEREST BEARING FUND HAS BEEN ADVANCED TO ZEE SPORTS LTD., WHICH IS INTEREST FREE. A PERUSAL OF T HE VARIOUS SUBMISSIONS MADE BEFORE THE AO AND THE LD. CIT(A) SHOWS THAT TH E LOWER AUTHORITIES HAVE NOT AT ALL CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE INCLUDING THE SOURCES AND UTILISATION OF FUNDS BEFORE DISALLO WING THE INTEREST ON ACCOUNT OF LOAN ADVANCED TO ZEE SPORTS LTD. UNDER T HESE CIRCUMSTANCES, WE DEEM IT PROPER TO RESTORE THE ISSUE BACK TO THE FIL E OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH L AW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 6 ITA NO. : 4427/MUM/2009 (ASSESSMENT YEAR : 2004-05) 11. THE ASSESSEE IN ITS VARIOUS GROUNDS HAS CHALLEN GED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF `. 90,29,218/- BEING INTEREST DISALLOWED U/S. 36(1)(III) OF THE ACT BY THE AO. 12. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUND IS IDENTICAL TO THE GROUNDS RAISED IN ITA NO. 4426/MUM/2009. WE HA VE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HA VE BEEN RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. FOLLOWING TH E SAME RATIO THE MATTER IS RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATI ON IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY, ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, APPEAL IN ITA NO. 4426/MUM/2009 FOR A.Y. 2003-04 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL IN ITA NO. 4427/M/2009 FOR A.Y. 2004-05 IS ALLOWED FOR STATIST ICAL PURPOSE. ORDER PRONOUNCED ON THIS 21 ST DAY OF OCTOBER, 2011. - SD /- - SD /- ( B. R. MITTAL ) ( R. K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 21.10.2011 ITA NO : 4426 & 4427/MUM/2009 M/S. BUDDHA FILMS LTD. 7 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, B - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI