FIROZ NADIADWALA, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 5719/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3166 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 23-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S SENT H IL KUMARAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 5719/MUM/2013 (ASSESSMENT YEAR : 2007-08) MR. FIROZ NADIADWALA, PLOT NO.2, BARKAT, 5 TH CROSS GULMOHAR RD., JVPD SCHEME, MUMBAI 400 049 PAN:AADPN 1426C ... APPELLANT VS. THE ASST. COMMISSIONER OF INCOME-TAX 11(1), 4 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI S. SENTHIL KUMARAN DATE OF HEARING : 08/06/2016 DATE OF PRONOUNCEMENT : 15/06/2016 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2007-08 IS DIRECTED AGAINST AN OR DER PASSED BY CIT(A)-3, MUMBAI DATED 26/08/2013, WHICH IN TURN AR ISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28/12/2012. 2 ITA NO. 5719/MUM/2013 (ASSESSMENT YEAR : 2007-08) 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING TWO GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPALS)-3 ERRED IN CONF IRMING THE ORDER OF LD ASSESSING OFFICER IN DISALLOWING DEDUCT ION OF INTEREST OF |RS.75,24,622/-. 2. WITHOUT PREJUDICE TO THE FOREGOING GROUND OF APP EAL AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW THE LD COMMISSIONER OF INCOME TAX (APPEALS)-3 ERRED IN NOT GIVING DIRECTION FOR ALLOWING DEDUCTION OF INTEREST IN ASS ESSMENT YEAR 2008-09(THE YEAR OF RELEASE OF THE RESPECTIVE FILMS )EVEN THOUGH IT WAS CLEAR AS PER RECORDS BEFORE HIM THAT THE SAID F ILMS WERE RELEASED IN AY 2008-09 AND THE SAID DEDUCTION HAD NOT BEEN CLAIMED IN AY 2008-09. 3. AT THE TIME OF HEARING, NONE APPEARED ON BEHAL F OF THE ASSESSEE IN SPITE OF ISSUANCE OF NOTICE FOR THE HEARING AND LD. DEPARTMENTAL REPRESENTATIVE WAS PRESENT FOR THE RESPONDENT REVEN UE. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE APPE AL IS BEING DISPOSED OFF EX-PARTE QUA THE APPELLANT, AFTER HEAR ING LD. DEPARTMENTAL REPRESENTATIVE ON MERITS IN TERMS OF RULE 24 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. 4. IN BRIEF, THE RELEVANT FACTS ARE THAT THE APPELL ANT IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF PRODUCTION OF FILMS AND FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, HE FILED A RETURN OF INCO ME DECLARING AN INCOME OF RS.2,52,07,250/-, WHICH WAS SUBJECT TO SC RUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 30/12/2009, W HEREBY THE INCOME WAS ASSESSED AT RS.2,63,40,770/-. SUBSEQUENTLY, T HE ASSESSMENT WAS REVIEWED BY THE COMMISSIONER IN TERMS OF SECTION 26 3 OF THE ACT AND THE SAME WAS FOUND TO BE ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE, QUA THE DEDUCTION OF INTER EST EXPENDITURE OF RS.75,24,622/-, ALLOWED IN THE ASSESSMENT. IN THE IMPUGNED ORDER 3 ITA NO. 5719/MUM/2013 (ASSESSMENT YEAR : 2007-08) PASSED CONSEQUENT TO THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT, THE ASSESSING OFFICER HAS REASSESSE D THE INCOME AT RS.3,38,55,394/-, WHICH, INTER-ALIA, CONSISTS OF A DISALLOWANCE OF INTEREST EXPENDITURE OF RS.75,24,622/-, WHICH IS THE SUBJECT MATTER OF GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE BEFORE US. 5. THE RELEVANT FACTS WHICH EMERGE FROM THE ORDERS OF THE AUTHORITIES BELOW REVEAL THAT THE COMMISSIONER EXAM INED THE RECORDS OF ASSESSMENT UNDER SECTION 263 OF THE ACT AND FOUN D THAT DURING THE YEAR UNDER CONSIDERATION, ONLY ONE FILM I.E. PHIR HERA PHERI HAS BEEN RELEASED AND THE COST OF PRODUCTION OF WHICH WAS FULLY CLAIMED AS DEDUCTION. TWO OTHER FILMS NAMELY, WELCOME AND FOOL-N-FINAL ARE STILL UNDER PRODUCTION AND THE COST OF PRODUCTION O F THESE FILMS HAVE BEEN REFLECTED IN THE CLOSING STOCK. IT WAS NOTICE D THAT IN RESPECT OF THE SAID TWO FILMS ASSESSEE HAD PAID INTEREST OF RS.33, 31,086/- AND RS.41,93,536/- TO THE IDBI BANK. THE SAID INTEREST EXPENDITURE WAS CLAIMED BY THE ASSESSEE BY WAY OF DEBIT IN THE PROF IT & LOSS ACCOUNT AND WHICH WAS ALLOWED BY THE ASSESSING OFFICER IN THE O RIGINAL ASSESSMENT FINALIZED UNDER SECTION 143(3) OF THE ACT DATED 30/ 12/2009. THE COMMISSIONER NOTICED THAT IDBI BANK HAD ADVANCED TH E LOANS FOR THE PURPOSE OF MEETING THE COST OF PRODUCTION OF THESE TWO FILMS AND, THEREFORE, THE INTEREST EXPENDITURE OF RS.75,24,622 /- WAS DIRECTLY RELATABLE TO THE COST OF PRODUCTION OF THESE TWO FI LMS AND THAT SUCH EXPENDITURE COULD NOT BE ALLOWED AS DEDUCTION AS TH E FILMS WERE NOT RELEASED DURING THE YEAR UNDER CONSIDERATION AND TH E SAME FORMED PART OF COST OF PRODUCTION AS DEFINED UNDER RULE 9A OF THE INCOME TAX RULES, 1962, IN RESPECT OF THE TWO FILMS. 4 ITA NO. 5719/MUM/2013 (ASSESSMENT YEAR : 2007-08) 6. PURSUANT TO THE AFORESAID DECISION OF COMMISSION ER UNDER SECTION 263 OF THE ACT, THE ASSESSING OFFICER HAS HELD THAT THE INTEREST EXPENDITURE OF RS.75,24,622/- SHALL FORM PART OF CO ST OF PRODUCTION OF THESE TWO FILMS WHICH WAS TO BE CONSIDERED IN ACCO RDANCE WITH RULE 9A OF THE INCOME TAX RULES. ACCORDINGLY, THE EXPENDIT URE WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE ASSESSING OFFICER PRIMARILY ON THE GRO UND THAT THE TRIBUNAL VIDE ITS ORDER DATED 10/04/2013 IN ITA NO. 7977/MUM/2011, HAD AFFIRMED THE VIEW OF COMMISSIONER ON MERITS OF THE DISALLOWANCE WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE AGAIN ST THE ORDER OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT, AND, THE IMPUGNED DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ACCO RDINGLY. AS PER THE CIT(A), THE TRIBUNAL AFFIRMED THAT THE INTEREST ON BORROWINGS IN QUESTION, WHICH HAD BEEN TAKEN SPECIFICALLY FOR THE PRODUCTION OF TWO FILMS WAS LIABLE TO BE CONSIDERED AS PART OF COST O F PRODUCTION AS PER RULE 9A OF THE RULES. AGAINST THE AFORESAID DECI SION, ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING, LD. DEPARTMENTAL REPRESE NTATIVE POINTED OUT THAT THE DECISION OF THE CIT(A) WAS BASED ON TH E ORDER OF THE TRIBUNAL DATED 10/04/2013(SUPRA) ON THE VERY SAME I SSUE AND, THEREFORE, NO INTERFERENCE IS CALLED FOR. THERE IS NO MATERIAL BEFORE US, WHICH WOULD REQUIRE US TO DEPART FROM THE ORDER OF THE TRIBUNAL DATED 10/04/2013(SUPRA), WHICH HAS BEEN RELIED UPON BY TH E CIT(A). THERE IS ALSO NOTHING ON RECORD TO ESTABLISH THAT THE ORDER OF THE TRIBUNAL DATED 10/04/2013(SUPRA) DOES NOT CONTINUE TO HOLD THE FIE LD. AS A 5 ITA NO. 5719/MUM/2013 (ASSESSMENT YEAR : 2007-08) CONSEQUENCE, WE HEREBY CONFIRM THE ORDER OF THE CIT (A) AND ASSESSEE FAILS ON GROUND OF APPEAL NO.1. 8. BY WAY OF GROUND OF APPEAL NO.2, THE ALTERNATIVE PLEA OF THE ASSESSEE IS THAT IN CASE THE DISALLOWANCE OF RS.75, 24,622/- IS SUSTAINED IN THE INSTANT YEAR, THEN THE SAME TO BE DIRECTED T O BE ALLOWED IN ASSESSMENT YEAR 2008-09, I.E. THE YEAR IN WHICH THE TWO FILMS WERE RELEASED. THE AFORESAID PLEA OF THE ASSESSEE, IN OU R VIEW, IS CONSEQUENTIAL TO THE DECISION IN GROUND OF APPEAL N O.1, AND DESERVES TO BE EXAMINED BY THE ASSESSING OFFICER IN THE ASSESSM ENT YEAR 2008-09, AS AND WHEN IT IS RAISED BY THE ASSESSEE BEFORE HI M. THE ASSESSING OFFICER SHALL CONSIDER THE PLEA OF THE ASSESSEE IN ACCORDANCE WITH LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS FOR STATISTI CAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/201 6 SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 15/06/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI