MAD ENTERTAINMENT LTD, MUMBAI V. ASST CIT CIR 11(1), MUMBAI

ITA 6274/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3942 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESHWARI MOTWANI
• Assessee Lawyers: DHIRENDRA M SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 627 4 /MUM/201 2 (ASSESSMENT YEAR 200 9 - 1 0 ) MAD ENTERTAINMENT LTD. , C/O MANGALDAS D SHAH & CO., 506 LOTUS HOUSE, 5 TH FLOOR, 33 - A, NEW MARINE LINES, MUMBAI 400 04 20 PAN: AAB CM 2 8 69 H VS ASST. COMMISSIONER OF INCOME TAX C IRCLE 1 1 (1) , A A YAKA R BHAVAN, 6 TH FLOOR, R.NO.667, M K ROAD, MUMBAI - 400 0 20 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DHIRENDRA M SHAH RESPONDENT BY : SMT RAJESHWARI MOTWANI /DATE OF HEARING : 0 3 - 0 5 - 201 6 /DATE OF PRONOUNCEMENT : 0 3 - 0 5 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 1 3.0 8 .2012 , PASSED BY CIT(A) - 3, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) , FOR THE ASSESSMENT YEAR 200 9 - 1 0 , ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE OF R S.14,03,651/ - BEING 10% OF THE TOTAL CASH EXPENSES MADE WHICH ADDITION MADE BE DELETED. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT, ALL SUCH EXPENSES ARE INCURRED IN COURSE OF THE BUSINESS 2 MAD ENTERTAINMENT LTD. ITA NO. 6274 /M UM /201 2 AND THAT ALL SUCH EXPENSES ARE DULY ACCOUNTED FOR AND SUPPORT ED BY VOUCHERS AND ARE VERIFIABLE. 2. BRIEF FACTS QUA THE ISSUE INVOLVED ARE THAT, THE ASSESSEE IS IN THE BUSINESS OF PRODUCTION OF COMMERCIAL FILMS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT, THE ASSESSEE HAS DEBITED CASH EXPENS ES AMOUNTING TO RS.1,40,36,506/ - AND ACCORDINGLY, THE ASSESSEE WAS REQUIRED TO SUBSTANTIATE THE CLAIM BY PR ODUCING NECESSARY EVIDENCE S . IN RESPONSE, THE ASSESSEE SUBMITTED THE CASH VOUCHERS AND ALSO EXPLAINED THE NATURE OF EXPENSES AND THE REQUIREMENT OF T HE BUSINESS . THE AO AFTER EXAMINING THE DETAILS OF EXPENSES FOUND THAT MOST OF THE EXPENSES WERE UNSUPPORTED BY THIRD PARTY BILLS. ACCORDINGLY, HE DISALLOWED 10% OF THE SAID EXPENSES AS PER THE REASONING GIVEN AT PARA 4.4 TO 4.5. 3. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THE INCURRING OF CASH EXPENSES ARE INEVITABLE IN THE LINE OF TV FILMS AND COMMERCIALS AND IT IS DIFFICULT TO OBTAIN THIRD PARTY BILLS. ASSESSEE FURTHER EXPLAINED THE NATURE OF EXPENSES, HOWEVER, LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE ON THE GROUND THAT THE EXPENSES WERE PURPOSELY KEPT LOW TO ESCAPE THE PROVISION OF SECTION 40A(B), THAT IS, BELOW RS.20,000/ - AND TOTAL CASH EXPENSES COMES TO 5.6% OF THE TOTAL EXPENSES CLAIMED, WHICH IS VERY HIGH CONSIDERING THE NAT URE OF ASSESSEES BUSINESS. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US, THE LD. COUNSEL SUBMITTED THE DETAILS OF EXPENSES, W H ICH ARE IN THE FORM OF EXPENSES INCURRED ON CAMERA CREW ; SETTING OF PROPS ON SETS; ON THE EQUIPMENT HIRE / COSTUME S; LUNCH FOR THE STAFF AND WELFARE EXPENSES ; STAY ; LOCATION HIRE ; PRODUCTION EXPENSES ; TRAVELING EXPENSES AND OTHER MISCELLANEOUS EXPENSES. THE BREAK - UP OF THESE EXPENSES GIVEN AS UNDER: - 3 MAD ENTERTAINMENT LTD. ITA NO. 6274 /M UM /201 2 CASH EXPENSES DETAIL YEAR ENDING 2009 ASST. YEAR 2009 - 10 DIRECTOR FEES ARE DIRECTOR FEES 393514 393514 393514 CAMERA CREW CAMERA CREW 10000 10000 10000 SETTING SET/MATERIAL ERECTION SETTING 40500 400929 441429 441429 PROPS/EQUIPMENT HIRE/C O STUMES COSTUMES EQUIPMENT HIRE CHARGES PROPS. HIRE CHARGES 2922402 1631042 37939 4591383 LUNCH & STAFF WELFARE EXP FOOD & LUNCH EXPS LUNCH & STAFF WELFARE 1369343 210319 1579662 1579662 STUDIO LOCATION HIRE LOCATION CO - ORDINATION EXP. LOCATION HIRE CHARGES 156000 1476476 1632476 1632476 MEMBERSHIP & SUBSCRIPTION FILING FEES 3300 3000 3300 PRODUCTION EXPENSES MISC. PRODUCTION EXPENSES STUNTMAN CHARGES 2930069 21,400 2951469 2951469 TRAVELLING EXP. TRAVELLING/HOTEL STAY (PRODUCTION) 1610256 1610256 1610256 MISCELLANEOUS & GENERAL EXPENSES BMC LICENSE FEES MISC. EXP GENERAL OFFICE EXPS. 12000 752455 58562 823017 823017 GRAND TOTAL 14036506 THUS, HE SUBMITTED THAT NO AD - HOC DISALLOWANCE SHOULD BE MADE. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF THE CIT(A). 4 MAD ENTERTAINMENT LTD. ITA NO. 6274 /M UM /201 2 6. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER AND MATERIAL PLACED ON RECORD, WE FIND THAT , LOOKING TO THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE, IT IS DIFFICULT TO GET A THIRD PARTY BILL FOR MOST OF THE EXPENSES AND INCURRING OF CASH EXPENSE S IN THIS LINE OF ACTIVITIES SEEMS TO BE QUITE INEVITABLE. HOWEVER, LOOKING TO THE FACTS AND CIRCUMSTANCES AND THAT SOME OF THE EXPENSES CANNOT BE PUT TO FULL VERIFICATION, THEREFORE, IN THE INTEREST O F JUSTICE , WE ARE REDUCING THE DISALLOWANCE OF CASH EXPENSES TO 5%. ACCORDINGLY, THE DISALLOWANCE ON ACCOUNT OF C A S H EXPENSES WOULD BE 5% AND THUS THE GROUND RAISED BY THE AS S E S SEE IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MAY , 2016 . SD/ - SD/ - ( ) ( ) (B R BASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 3 RD MAY , 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 3 , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX - 11 , MUMBAI. 5 ) , , / THE D.R. B BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS