ASSTT.C.I.T.,CENTRAL CIRCLE-13, MUMBAI V. SHRI. ABHISHEK BACHCHAN, MUMBAI

ITA 6051/MUM/2008

• Counselvise Citation: 605119914 RSA 2008
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-11-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 07-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Keywords: Business expenditure; Additional evidence; Cost of acquisition
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI B.R. MITTAL (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) ITA NO.6051/MUM/2008 ASSESSMENT YEAR-2001-02 THE ACIT, CENTRAL CIRCLE-13, OLD C.G.O BLDG., MUMBAI-400 020 VS. SHRI ABHISHEK BACHCHAN, PRATIKSHA N.S.ROAD NO. 10, JUHU JVPD SCHEME, MUMBAI-400 049 PAN-AACPB 9197K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI P.K.B. MENON RESPONDENT BY: SHRI DILIP J. THAKKAR SHRI RAJESH P. SHAH DATE OF HEARING : 10. 01.2012 DATE OF PRONOUNCEMENT: 13.1.2012 O R D E R PER B.R. MITTAL, JM : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMEN T YEAR 2001-02 AGAINST ORDER OF LD. CIT(A) DT. 17.7.2008 ON FOLLOW ING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE FROM THE ASSESSEE, EVEN THOUGH THE ASSESSE E DID NOT HAVE SUFFICIENT CAUSE FOR NOT PROVIDING THE INFORMA TION TO THE AO WHEN SPECIFICALLY REQUIRED TO DO SO. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING T HE DEDUCTION OF COST OF PRINT AMOUNTING TO RS. 29,06,404/-, HOLD ING THAT THE SAME IS ALLOWABLE TO THE ASSESSEE AS PER PROVISIONS OF RULE 9B(2) WHEN THE COST OF ACQUISITION AS DEFINED FOR T HIS ENTIRE RULE 9B IS IN THE FORM OF EXPLANATION GIVEN BELOW RULE 9 B(1), AND EXPENDITURE ON COST OF PRINT IS SPECIFICALLY EXCLUD ED FROM THE COST OF ACQUISITION IN CASES WHERE THE DISTRIBUTOR ACQUIRES RIGHTS OF DISTRIBUTION ON A MINIMUM GUARANTEE BASIS. THIS ASSESSEE ITA NO. 6051/M/08 2 HAD ACQUIRED DISTRIBUTION RIGHTS ON THE BASIS OF MI NIMUM GUARANTEE AMOUNT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING THE RELIEF TO THE ASSESSEE. 2. THE ASSESSEE IS A FILM ARTIST. DURING THE ASSES SMENT YEAR UNDER CONSIDERATION, ASSESSEE BOUGHT DISTRIBUTION RIGHTS OF FILM DHAI ASKSHAR PREM KE. HE CLAIMED INTER ALIA RS. 29,06,404/- ON ACCO UNT OF COST OF PRINTS. THE ASSESSING OFFICER DISALLOWED SAID CLAIM OF ASSESSEE ON THE GROUND THAT ASSESSEE COULD NOT FURNISH DETAILS IN RESPECT THERE OF. BEING AGGRIEVED, ASSESSEE FILED APPEAL BEFORE FIRS T APPELLATE AUTHORITY. 3. THE LD. CIT(A) CONSIDERED THE FACT THAT THERE WA S AN AGREEMENT BETWEEN ASSESSEE AND M/S. ETHNIC ENTERPRISES. THE ASSESSEE ENTRUSTED THE EXPLOITATION OF HIS DISTRIBUTION RIGHTS FOR OVER A PERIOD OF 5 YEARS TO M/S. ETHNIC ENTERPRISES ON COMMISSION BASIS @ 10% OF TOT AL REALIZATION. M/S. ETHNIC ENTERPRISES WAS REQUIRED TO INCUR PRINT COST AND PUBLICITY EXPENSES AT ASSESSEES COST. HENCE SAID EXPENDITURE OF RS. 29, 06,404 TOWARDS COST OF PRINTS WAS DEBITED IN ASSESSEES NAME AND IN THE BO OKS OF ACCOUNT OF ETHNIC ENTERPRISES. LD. CIT(A) CALLED FOR REMAND REPORT FR OM AO. THE AO CONFIRMED THE ABOVE FACTS BUT STATED THAT SAID EXPE NDITURE IS A ONE TIME COST AND BENEFIT ACCRUED TO ASSESSEE IS ENDURING IN NATU RE I.E. OVER A PERIOD OF 5 YEARS. HENCE, TOTAL EXPENSES DEBITED ARE CAPITAL/D EFERRED EXPENDITURE. LD. CIT(A) CONSIDERED THE REMAND REPORT OF AO AND SUBMI SSIONS OF ASSESSEE THAT ASSESSEE INCURRED SAID EXPENDITURE FOR DISTRIBUTION OF FILM AND HELD THAT SAID EXPENDITURE IS ALLOWABLE EXPENDITURE AS PER RULE 9B (2) OF I.T. RULES 1962 AS THE FILM WAS RELEASED DURING THE PREVIOUS YEAR ON 2 9.9.2000. THEREFORE, DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL . ITA NO. 6051/M/08 3 4. DURING THE COURSE OF HEARING, LD. DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT EXPENDITURE INCURRED BY ASSESSEE ON COST OF PRINTS IS NOT ALLOWABLE IN VIEW OF CLAUSE (I) OF EXPLANATION TO R ULE 9B(1). HOWEVER, LD. AR SUBMITTED THAT ISSUE HAS BEEN SQUARELY COVERED BY D ECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS PRASAD PROD UCTIONS PVT. LTD., 179 ITR 147 AND IT IS AN ALLOWABLE EXPENDITURE U/S. 37 OF INCOME TAX ACT. 5. WE HAVE CAREFULLY CONSIDERED SUBMISSIONS OF LD. REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW. WE HAVE A LSO CONSIDERED ABOVE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F PRASAD PRODUCTIONS PVT. LTD (SUPRA). WE CONSIDER IT PRUDENT TO STATE THE FOLLOWING RELEVANT PARA FROM HEAD-NOTE WHICH READS AS UNDER: THOUGH ALL EXPENDITURE INCURRED ON THE PRODUCTION OF A FILM WOULD BE ITS COST OF PRODUCTION, THAT WOULD EX CLUDE THE EXPENDITURE INCURRED FOR THE PREPARATION OF THE POS ITIVE PRINTS OF THE FILM SO PRODUCED. THE PURPOSE OF OBTAINING POSITIVE PRINTS IS TO EXHIBIT THE FILM PRODUCED, WHICH IS A STAGE AFTER THE COMPLETION OF THE PRODUCTION. ANY EXPENDITURE INCU RRED IN CONNECTION WITH THE PREPARATION OF THE POSITIVE PRI NTS FOR PURPOSES OF EXHIBITION WOULD REALLY BE POST-PRODUCT ION EXPENSES AND ALSO AN ITEM OF EXPENDITURE IN RELATIO N TO THE BUSINESS OF PRODUCTION AND EXHIBITION OF THE FILM A ND WOULD QUALIFY FOR DEDUCTION AS EXPENDITURE LAID OUT OR EX PENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS. 6. THE ISSUE BEFORE US IS AS TO WHETHER COST OF PRE PARATION OF POSITIVE PRINTS TO EXHIBIT THE FILM IS AN ALLOWABLE BUSINESS EXPENDITURE OR NOT. WE FIND THAT SAID ISSUE HAS BEEN CONSIDERED BY HONBLE MADR AS HIGH COURT IN THE ABOVE CASE (SUPRA) WHEREIN IT HAS BEEN HELD THAT TH E COST OF PREPARATION OF POSITIVE PRINTS IS DEDUCTIBLE U/S. 37 OF THE I.T. AC T. FURTHER THE QUESTION ARISES AS TO WHETHER RULE 9B OVERRIDE PROVISIONS OF SEC. 37 OF I.T. ACT. SAID ISSUE HAS BEEN CONSIDERED BY ITAT MUMBAI BENCH IN T HE CASE OF MUKTA ARTS PVT. LTD. VS ACIT 292 ITR (AT) 16 (MUM) WHEREIN IT WAS HELD THAT RULE 9A DOES NOT OVERRIDE PROVISIONS OF I.T. ACT. RULE 9A RECOGNIZES SPECIAL CHARACTERISTICS OF FILM MAKING AND HAS BEEN ENACTED TO PROVIDE GUIDELINES OF ITA NO. 6051/M/08 4 AMORTIZATION OF FILM PRODUCTION COSTS OVER A NUMBER OF YEARS AND DOES NOT DEAL WITH THE ALLOWABILITY OR DISALLOWANCE OF EXPEN DITURE AS SUCH. RULE 9A DOES NOT COVER ALL SITUATIONS AND ALL TYPES OF EXPE NSES. IT IS RELEVANT TO STATE THAT RULE 9A DEALS WITH DEDUCTION IN RESPECT OF EXP ENDITURE ON PRODUCTION OF FEATURE FILMS AND 9B DEALS WITH DEDUCTIONS IN RESP ECT OF EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS OF FEATURE FILMS . THEREFORE, FOLLOWING THE DECISION OF ITAT MUMBAI BENCH, WE ARE OF THE CONSID ERED VIEW THAT IF AN EXPENDITURE IS OTHERWISE ALLOWABLE AS PER PROVISION S OF I.T. ACT, RULE 9A AND 9B OF I.T. RULE DO NOT OVERRIDE PROVISIONS OF I.T. A CT. SINCE COST OF PRINT IS AN ALLOWABLE EXPENDITURE IN THE YEAR IN WHICH FILM IS RELEASED AND HONBLE MADRAS HIGH COURT HAS HELD IN THE CASE OF PRASAD PR ODUCTIONS (SUPRA) THAT COST OF MAKING POSITIVE FILM IS ALLOWABLE U/S. 37 O F THE I.T. ACT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). HENCE, W E UPHOLD THE ORDER OF LD. CIT(A) BY REJECTING GROUNDS OF APPEAL TAKEN BY DEPA RTMENT. 7. BEFORE WE PART WITH THIS APPEAL, WE MAY STATE TH AT AT THE TIME OF HEARING LD. DR DID NOT MAKE ANY SUBMISSION AS TO WH AT ADDITIONAL EVIDENCE WERE ENTERTAINED BY LD. CIT(A) IN VIOLATION OF RULE 46A OF I.T. RULE. WE MAY ALSO STATE THAT LD. CIT(A) ALSO SOUGHT REMAND REPOR T FROM AO ON THE SUBMISSIONS MADE BY ASSESSEE BEFORE HIM. THEREFORE QUESTION OF ADMITTING ADDITIONAL EVIDENCE WITHOUT GIVING AN OPPORTUNITY T O AO DOES NOT ARISE. 8. HENCE GROUNDS OF APPEAL TAKEN BY DEPARTMENT ARE REJECTED. 9. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS DISM ISSED. ORDER PRONOUNCED ON THIS 13 TH DAY OF JANUARY, 2012 SD/- SD/- ( PRAMOD KUMAR) (B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 13 TH JANUARY, 2012 RJ ITA NO. 6051/M/08 5 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI