ASST CIT 16(1), MUMBAI V. YASH RAJ FILMS P.LTD, MUMBAI

ITA 5738/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8770 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 22-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Depreciation
• Section: 40A(3); 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 5738 /MUM/20 1 5 (ASSESSMENT YEAR 20 0 9 - 1 0 ) ACIT 16(1) ROOM NO. 439 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. VS. M/S. YASH RAJ FI LMS PVT. LTD. 5, SHAH INDUSTRIAL ESTATE, VERA DESAI ROAD ANDHERI WEST MUMBAI - 400 053. PAN: AAACY1176E ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RAJESH P. SHAH DEPARTMENT BY S HRI V. VIDHYADHAR DATE OF HEARING 3 1 . 10 . 201 7 DATE OF PRONOUNCEMENT 31 . 10 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 28.9.2015 PASSED BY THE LEARNED CIT(A) - 4, MUMBAI AND IT RELATES TO A.Y. 2009 - 10. THE REVENUE IS AGGRIEVED BY THE DEC I SION RENDERED BY THE LEARNED CIT(A) ON THE FOLLOWING ISSUES : - A) DISALLOWANCE OF DEPRECIATION ON BUNGLOW ` 22,69,610/ - B) DISALLOWANCE MADE U/S. 40A(3) OF THE ACT ` 8,89,855/ - C) DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT ` 73,09,909/ - D) DISALLOWANCE MADE U/S. 40(A)(IA) OF THE AC T ` 3,98,73,088/ - 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PRODUCTION AND DISTRIBUTION OF FEATURE FILMS, SELLING OF AUDIO AND VIDEO CASSETTE S, COMPACT DISC AND DIGITAL DISCS OF MOVIES PRODUCED AND DISTRIBUTED BY IT. ASSESSM ENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT BY MAKING VARIOUS ADDITIONS. IN THE APPELLATE PROCEEDINGS THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE IN RESPECT OF ABOVE SAID ITEMS AND HENCE THE REV ENUE HAS FILED THIS APPEAL BEFORE US. M/S. YASH RAJ FILMS PVT. LTD. 2 3. FIRST ISSUE RELATES TO DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE ON A BUNGLOW LOCATED AT NO. 17, JALPANKH. THE ASSESSING OFFICER NOTICED THAT THE SURVE Y TEAM HAS CONDUCTED A SURVEY DURING THE YEAR REL EVA NT TO A.Y. 2010 - 11 AND HAS GIVEN A FINDING THAT NO BUSINE SS ACTIVITY WAS CARRIED ON IN THE ABOVE SAID PREMISES . ACCORDINGLY, THE ASSESSING OFFICER TOOK THE VIEW THAT THE BUNGLOW WAS NOT USED FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY DISALLOWED THE DEPREC IATION AMOUNT OF ` 22,69,610/ - CLAIMED BY THE ASSESSEE THEREON . T HE LEARNED CIT(A) NOTICED THAT HIS PREDECESSOR HAS DELETED THE IDENTICAL DISALLOWANCE MADE IN A.Y. 2007 - 08 AND 2008 - 09 AND THE SAME WAS ALSO CONFIRMED BY THE ITAT. ACCORDINGLY, HE DELETED THE DISALLOWANCE OF DEPRECIATION. 4. WE HEARD THE PARTIES ON THIS ISSUE AND NOTICED THAT THE COORDINATE BENC H OF THE ITAT HAS CONSIDERED AN IDENTICAL DISALLOWANCE MADE IN A.Y. 2007 - 08 IN ITA NO. 2597/MUM/2012 AND DELETED THE DISALLOWANCE , VIDE ITS ORDER DATED 20 - 01 - 2017, WITH FOLLOWING OBSERVATIONS : - 16.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE SURVEY WAS CARRIED OUT DURING THE AY.2010 - 11, THAT THE ASSESSEE HAD CLAIMED DEPRECIATION FOR THE AY UNDER APP EAL, THAT ON THE BASIS OF RENOVATION WORK CARRIED OUT IN THE YEAR 2010 THE ISSUE OF ALLOWABILITY OF DEPRECIATION FOR EARLIER YEAR SHOULD NOT HAVE BEEN DECIDED. THE AO HAD TO CONSIDER THE FACTS OF THE YEAR UNDER CONSIDERATION. THE FAA AFTER CONSIDERING THE OLD RECORDS AND THE ORDER OF THE TRIBUNAL HAD GIVEN A FINDING OF FACT THAT THE PREMISES WAS BEING USED AS OFFICE PREMISES IN THE YEAR. NOTHING ADVERSE TO THE SAID FACT WAS BROUGHT ON RECORD BY THE DEPARTMENT. THEREFORE, IN OUR OPINION, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE FAA. UPHOLDING HIS ORDER, WE DISMISS GROUND NO.6. THE C O - ORDINATE BENCH HAS NO T ICED THAT THE FINDINGS GIVEN BY THE SURVEY TEAM WAS RELATED TO THE YEAR RELEVANT TO A .Y. 2010 - 11 AND THE SAME COULD N OT BE APPLIED FOR EARLIER Y EARS. CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF DEPRECIATION , SINCE FINDINGS GIVEN BY SURVEY TEAM M/S. YASH RAJ FILMS PVT. LTD. 3 CANNOT BE STRETCHED TO THE YEAR UNDER CONSIDERATION WITHOUT A NY PROOF . ACCORDINGLY, WE CONFIRM HIS ORDER PASSED ON THIS ISSUE. 5. THE NEXT ISSUE RELATES TO THE ISSUE OF DISALLOWANCE MADE U/S 40A(3) OF THE ACT. THE ASSESSEE HAD INCURRED EXPENSES BY WAY OF CASH TO THE TUNE OF RS.9,42,373/ - IN VIOLATION OF THE P ROVISIONS OF SEC. 40A(3) OF THE ACT. IT SUO - MOTO DISALLOWED A SUM OF RS.52,521/ - ONLY. THE REMAINING AMOUNT OF RS.8,89,852/ - RELATED TO FREIGHT CHARGES PAID TO VARIOUS AIRLINES FOR DISPATCHING THE PRINTS. IT WAS SUBMITTED THAT THE AIRLINES DEMANDED CASH ONLY AND FURTHER THE ACTUAL FREIGHT CHARGES COULD BE ASCERTAINED AT AIRPORTS ONLY. THE AO DID NOT ACCEPT THE SAME AND HENCE DISALLOWED THE CLAIM AS PER THE PROVISIONS OF SEC. 40A(3). THE LD CIT(A) ALLOWED THE CLAIM ON THE REASONING THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE UNDER EXCEPTIONAL CIRCUMSTANCES. 6. WE HEARD THE PARTIES ON THIS ISSUE. THE PROVISIONS OF SEC. 40A(3) PROVIDES FOR DISALLOWANCE OF EXPENSES INCURRED IN EXCESS OF THRESHOLD LIMIT BY WAY OF CASH. RULE 6DD OF THE IT RULES LISTS OUT THE EXCEPTIONAL CIRCUMSTANCES UNDER WHICH THE EXPENDITURE IN EXCESS OF THE THRESHOLD LIMIT COULD BE INCURRED BY WAY OF CASH. HENCE THE GENERAL REASONING GIVEN BY LD CIT(A) WITHOUT POINTING OUT ANY SPECIFIC EXCEPTIONAL CIRCUMSTANCES GIVEN IN RULE 6DD IS NOT IN ACCORDANCE WITH THE LAW. HENCE THE LD A.R WAS ASKED TO POINT OUT THE CIRCUMSTANCE SPECIFIED IN RULE 6DD , UNDER WHICH THE IMPUGNED PAYMENTS WOULD BE COVERED. THE LD A.R SUBMITTED THAT THE IMPUGNED PAYMENTS WOULD BE COVERED BY CLAUSE (K) OF RULE 6DD, WHICH READS AS UNDER: - (K) WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. THE LD A.R SUBMITTED THAT THE DISTRIBUTORS OF FILMS SHOULD BE CONSIDERED AS TH E AGENT OF THE ASSESSEE. M/S. YASH RAJ FILMS PVT. LTD. 4 7. WE ARE UNABLE TO UNDERSTAND AS TO HOW CLAUSE (K) STATED ABOVE WOULD BE APPLICABLE. FIRST OF ALL, THE FREIGHT CHARGES HAVE BEEN PAID BY THE ASSESSEE TO THE AIRLINES AND NOT THROUGH ANY AGENT. NEXT THE DISTRIBUTORS ARE LICE NCEES AND CANNOT BE CONSIDERED AS AGENT BY ANY STRETCH OF IMAGINATION. SINCE THE IMPUGNED PAYMENTS DO NOT FALL IN ANY OF THE EXCEPTIONAL CIRCUMSTANCES SPECIFIED IN RULE 6DD, THEY ARE LIABLE TO BE DISALLOWED U/S 40A(3) OF THE ACT. ACCORDINGLY, WE SET ASID E THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE ADDITION MADE BY THE AO. 8. NEXT ISSUE RELATES TO DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT AMOUNTING TO ` 73.09 LAKHS. T HE T AX AUDITOR REPORTED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOUR CE ON THE EXPENDITURE OF ` 35.58 LAKHS AND ` 37.51 LAKHS. THE ASSESSING OFFICER ADDED BOTH THE PAYMENT AGGREGATING TO ` 73.09 LAKHS U/S. 40(A)(IA) OF THE ACT. BEFORE THE LEARNED CIT(A) ASSESSEE SUBMITTED THAT IT HAS PAID TDS AMOUNT OF ` 1,35,906/ - ON 30.9. 2009 AND HENCE HIS CASE IS COVERED BY THE AMEND MENT BROUGHT IN IN SECTION 40(A)(IA) OF THE ACT W.E.F. 1.4.2010 , AS PER WHICH NO DISALLOWANCE SHALL BE MADE, IF PAYMENT OF TDS IS MADE BY THE DUE DATE OF FILING OF RETURN OF INCOME. LEARNED AR SUBMITTED THAT SHORTAGE ON ACCOUNT OF DEDUCTION TO TDS AMOUNT WAS ON ACCOUNT OF NON - DEDUCTION OF TAX AT SOURCE ON THE SERVICE TAX COMPONENT COMPRISED IN THE AMOUNT PAYABLE TO THE RESIDENT. ACCORDINGLY BY PLACING RELIANCE ON THE CIRCULAR NO. 1 OF 2014 DATED 13.1.2014 ISS UED BY CBDT AND ALSO DECISION RENDERED BY CALCUTTA HIGH COURT IN THE CASE OF S.K. KEKRIWAL (2014) 46 TAXAMNN.COM 444 , IT WAS CONTENDED THAT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT WAS NOT WARRANTED. THE LEARNED CIT(A) AG R E E D WITH THE SAME AND ACCORDINGLY D ELETED THE DISALLOWANCE. 9. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICED THAT THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE WITHOUT EXAMINING THE DETAILS OF DISALLOWANCE VIS - - VIS TDS PAYMENT OF ` 1,35,906/ - . HENCE, FOR LIMITED PURPOSE OF VER IFYING AND LINKING TDS AMOUNT WITH IMPUGNED DISALLOWANCE, WE SET ASIDE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER. WE ALSO DIRECT M/S. YASH RAJ FILMS PVT. LTD. 5 THE AO TO FOLLOW THE RATIO LAID DOWN IN THE CASE OF S.K.TEKRIWAL (SUPRA) ALSO THE CIRCULAR ISSUED BY CBDT, REFERRED ABO VE. 10. LAST ISSUE RELATES TO DISALLOWANCE OF ` 39,873 LAKHS U/S. 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID A SUM OF ` 3.73 LAKHS TO M/S. APPLAUSE BHANSALI PVT. LTD. TOWARDS ROYALTY FOR TRANSFER OF RIGHTS IN THE MOVIES BUT DID NOT DEDUCT TAX AT SOURCE. SIMILARLY, AN AMOUNT OF ` 395 . 00 LAKHS WAS PAID TO M/S. RELIANCE MEDIA WORKS LTD. AS PROCESSING CHARGES BUT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE U/S. 194C INSTEAD OF SECTION 194J OF THE ACT. HENCE, THE ASSESSING OFFICE R DISALLOWED AGGREGATE AMOUNT OF ` 398.73 LAKHS U/S. 40(A)(IA) OF THE ACT. 11. BEFORE THE LEARNED CIT(A), ASSESSEE SUBMITTED THAT THE AMOUNT OF ` 3.73 LAKHS PAID TO M/S. APPLAUSE BHANSALI PVT. LTD. , ACTUALLY RELATED TO SH ARE OF PROFIT FOR THEATRICAL DISTR IBUTION OF FILMS , ON WHICH THERE IS NO REQUIREMENT TO DEDUCT TAX AT SOURCE. THE LEARNED CIT(A) AGREED WITH THE SAME AND ACCORDINGLY DELETED THE DISALLOWANCE OF ` 3.73 LAKHS. WITH REGARD TO PAYMENT MADE TO RELIANCE MEDIA WORKS LTD., ASSESSEE PLACED RELIA N CE ON THE DEC I SION RENDERED BY HON'BLE CALCUTTA HIGH COURT IN THE CASE OF S.K. KEKRIWAL (361 ITR 432), WHEREIN IT WAS HELD THAT DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT CANNOT BE MADE FOR SHORT DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, THE LEARNED CIT(A) D ELETED THE DISALLOWANCE OF ` 375.00 LAKHS ALSO. 12. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. WITH REGARD TO THE PAYMENT OF ` 3.73 LAKHS MADE TO APPLAUSE BHANSALI PVT. LTD., THE ASSESSEE HAS SUBMITTED THAT THE SAME REPRESENTS SHARE OF PRO FIT AND HENCE THE LEARNED CIT(A) HAS DELETED THE SAME. BEFORE US NO MATERIAL WAS PLACED BY THE REVENUE TO CONTRADICT THE FACTUAL ASPECT PRESENTED BEFORE THE LEARNED CIT(A). HENCE, WE CONFIRM THE ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE. M/S. YASH RAJ FILMS PVT. LTD. 6 13. WITH R EGARD TO THE PAYMENT MADE TO RELIANCE MEDIA WORKS LTD. , THE ASSESSEE HAS DEDUCTED TAX AT SOURCE U/S. 194C OF THE ACT WHEREAS THE ASSESSING OFFICER HAS TAKEN THE VIEW THAT TAX SHOULD HAVE BEEN DEDUCTED U/S. 194J OF THE ACT. EFFECTIVELY THIS RESULTS IN SHORT DEDUCTION OF TAX AT SOURCE AND HON'BLE CALCUTTA HIGH COURT HAS HELD IN THE CASE OF S.K. KEKRIWAL (SUPRA) THAT DISALLOWANCE U/S. 40(A)(IA) OF THE ACT CANNOT BE MADE FOR SHORT DEDUCTION OF TAX AT SOURCE. ACCORDINGLY, WE CONFIRM THE ORDER PASSED BY THE LEARN ED CIT(A) ON THIS ISSUE. 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS TREATED AS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 3 1 . 10 .201 7. SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 31 / 10 / 20 1 7 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, //TRU E COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI