HIGHLIGHT PICTURES (I) P.LTD, MUMBAI V. ASST CIT 11(1), MUMBAI

ITA 808/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84421 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 07-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 30-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA
• Assessee Lawyers: APURVA R SHAH
• Keywords: Depreciation
• Section: 40A(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, M UMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./I.T.A. NO.7129/MUM/2012 ( ! / ASSESSMENT YEAR :2009-10) HIGHLIGHT FILMS PVT. LTD., MAHALAXMI SILK MILS PREMISES, MATHURDAS MILLS COMPOUND, 126, N M JOSHI MARG, LOWER PAREL (W), MUMBAI-400013 / VS. ASSTT. COMMISSIONER OF INCOME TA X - 11(1), ROOM NO.434, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./ PAN/GIRNO.:AAACH2477F ./I.T.A. NO.808/MUM/2013 ( ! / ASSESSMENT YEAR :2009-10) HIGHLIGHT PICTURES (INDIA) PVT. LTD., MAHALAXMI SILK MILS PREMISES, MATHURDAS MILLS COMPOUND, N M JOSHI MARG, LOWER PAREL (W), MUMBAI-400013 / VS. ASSTT. COMMISSIONER OF INCOME TAX - 11(1), 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./ PAN/GIRNO.:AACB6674L '# ( / ASSESSEE BY : SHRI APURVA R SHAH $%'# ) ( /REVENUE BY: SHRI VIJAY KUMAR BORA * + ) ,- / DATE OF HEARING : 15.12.2014 .! ) ,- /DATE OF PRONOUNCEMENT : 17.12.2014 I.T.A. NO.7129/MUM/2012 AND 808/M/2013 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE D IRECTED AGAINST THE ORDERS PASSED BY THE LD. CIT(A)-3, MUMBAI IN THEI R RESPECTIVE HANDS AND THEY RELATE TO THE ASSESSMENT YEAR 2009-10. 2. BOTH THE ASSESSEES ARE FROM THE SAME GROUP AND THE ISSUES URGED BY THEM ARE IDENTICAL IN NATURE. HENCE BOTH THE APPEA LS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. BOTH COMPANIES ARE ENGAGED IN THE BUSINESS OF PR ODUCTION AND DISTRIBUTION OF ADVERTISEMENT FILMS AND OTHER PROGR AMMES. THE PECULIAR FEATURE IS THAT THEY GIVE A SEPARATE PROJECT NAME FOR EACH O RDER UNDERTOOK BY THEM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF BOTH THE ASSESSEES, THE AO NOTICED THAT THE BILLS RELATING TO PRODUCTION EXPEN SES CONTAINED THE NAME OF OTHER ASSESSEE, I.E. BILLS FURNISHED BY M/S HIGHLIGHT FI LMS PVT. LTD, CONTAINED THE NAME OF M/S HIGHLIGHT PICTURES (INDIA) PVT. LTD AND V ICE-VERSA. HENCE THE AO TOOK THE VIEW THAT THE EXPENSES CLAIMED BY BOTH THE ASSE SSEES IN RESPECT OF THE ABOVE SAID BILLS CANNOT BE CONSIDERED TO BE GENUINE AND ACCORDINGLY DISALLOWED THE SAME IN THE HANDS OF BOTH THE ASSESSEES. THE LD . CIT(A) ALSO CONFIRMED THE SAID DISALLOWANCE IN THE HANDS OF BOTH THE ASSESSEE S. 4. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT B OTH THE ASSESSEES ARE FROM THE SAME GROUP AND THEY ARE ALSO ENGAGED IN TH E SIMILAR LINE OF BUSINESS. THE NAMES OF THESE ASSESSEES ALSO SOUND SIMILAR. I N VIEW OF THE SAME, THERE WERE CONFUSION IN THE MINDS OF THE SUPPLIERS AND HE NCE THEY HAVE WRITTEN THE NAME OF OTHER ASSESSEE IN THE BILLS. THE LD. COUN SEL SUBMITTED THAT EACH BILL IS PROJECT SPECIFIC AND HENCE THE NAME OF THE PROJECT IS INVARIABLY WRITTEN IN ALL THE BILLS. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE EXPENDITURE COULD BE RELATED TO THE REVENUE ON THE BASIS OF PROJECT NAME. THE L D. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS ACCEPTED THE REVE NUE DECLARED FROM THE SPECIFIC PROJECTS UNDERTAKEN BY EACH OF THE ASSESSE ES AND HENCE, UNDER REVENUE-COST MATCHING PRINCIPLE, THE AO SHOULD HA VE ALLOWED THE RELEVANT I.T.A. NO.7129/MUM/2012 AND 808/M/2013 3 EXPENDITURE FOR ARRIVING AT THE INCOME, BY IGNORING THE UNINTENTIONAL ERROR IN NOTING THE NAME OF THE ASSESSEE. HE FURTHER SUBMIT TED THAT BOTH THE ASSESSEES HAVE INCURRED THE EXPENSES RELATING TO EACH OF THE PROJECT UNDERTAKEN BY THEM THROUGH BANKING CHANNELS BY ISSUING CHEQUES AND THE Y HAVE ALSO DEDUCTED TAX AT SOURCE, WHEREVER IT IS REQUIRED TO DO SO. ACCOR DINGLY THE LD. AR SUBMITTED THAT THE GENUINENESS OF EXPENSES COULD BE ASCERTAINED FR OM THESE FACTORS ALSO. ACCORDINGLY HE SUBMITTED THAT THE TAXING AUTHORITIE S WERE NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE CLAIM SIMPLY ON THE REA SONING THAT THE RELEVANT BILLS CONTAINED DIFFERENT NAME. 5. WE HAVE HEARD THE LD. DR ON THIS ISSUE AND PERUS ED THE RECORD. ADMITTEDLY BOTH THE PARTIES ARE ENGAGED IN THE SIMI LAR LINE OF BUSINESS. DURING THE COURSE OF HEARING THE LD. AR INVITED OUR ATTENT ION TO THE SOME OF THE BILLS PLACED IN THE PAPER BOOK FILED BY THE RESPECTIVE AS SESSEES. ON PERUSAL OF THE SAME, WE NOTICE THAT THE SAID BILLS CONTAINED THE PROJECT NAME, I.E., THERE IS MERIT IN THE CONTENTION OF LD A.R THAT IT IS POSSIB LE TO LINK THE RELEVANT EXPENDITURE WITH A PARTICULAR PROJECT. ACCORDING TO LD A.R, EA CH ASSESSEE HAS UNDERTAKEN DIFFERENT PROJECT AND THE REVENUES GENERATED THERE FROM HAVE BEEN DULY OFFERED IN THEIR RESPECTIVE HANDS. FURTHER THE LD. AR HAS ALSO POINTED OUT THAT THE PAYMENT FOR THE EXPENDITURE HAVE BEEN MADE BY BOTH THE ASSESSEES THROUGH CHEQUES AND TDS HAS ALSO BEEN DEDUCTED THEREON, WHE RE EVER IT IS REQUIRED TO DO SO. WE AGREE WITH THE CONTENTIONS OF THE ASSES SEE THAT THE REVENUE-COST MATCHING PRINCIPLE COULD NOT BE IGNORED WHILE DETE RMINING THE TOTAL INCOME OF THE ASSESSEE. IN THE INSTANT CASES, THE CONTENTION OF THE ASSESSEE IS THAT THE REVENUE GENERATED FROM A PARTICULAR PROJECT HAS BEE N ASSESSED BY THE ASSESSING OFFICER. HENCE, WE ARE OF THE VIEW THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE PERTAINING TO A PARTI CULAR PROJECT SHOULD BE DEDUCTED THERE FROM. WE HAVE NOTICED EARLIER THAT T HE TAX AUTHORITIES HAVE DOUBTED ABOUT THE GENUINENESS OF THE EXPENDITURE ON LY ON THE REASONING THAT THE RELEVANT BILLS CONTAINED THE NAME OF THE OTHER ASSE SSEE. HOWEVER, WE HAVE ALSO SEEN THAT THE SAID BILLS COULD BE LINKED TO A PARTI CULAR PROJECT. IT IS THE CLAIM OF THE ASSESSEE THAT THESE EXPENSES HAVE BEEN INCURRED BY WAY OF CHEQUE, MEANING THEREBY, THE FUNDS SHOULD HAVE GONE FROM THE BANK A CCOUNT OF THE ASSESSEES WHO CLAIM THE RELEVANT EXPENDITURE. IT IS ALSO SUB MITTED THAT TDS HAS ALSO BEEN DEDUCTED FROM SOME OF THE PAYMENTS. IN OUR VIEW, T HE AO COULD ASCERTAIN ABOUT I.T.A. NO.7129/MUM/2012 AND 808/M/2013 4 THE GENUINENESS OF THE EXPENDITURE CLAIM BY CONSIDE RING ALL THESE FACTORS. HOWEVER, WE NOTICE THAT THE AO HAS NOT EXAMINED THE SE CONTENTIONS AND HENCE WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH E XAMINATION AT THE END OF THE AO IN THE CASE OF BOTH THE ASSESSEES. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED LD. CIT(A) ON THIS ISSUE IN THE HANDS OF BOTH THE A SSESSEES AND RESTORE THE SAME TO THE FILE OF THE RESPECTIVE AO FOR FRESH EXAMINAT ION, BY DULY CONSIDERING THE SUBMISSIONS OF THE ASSESSEES AND OTHER RELEVANT FAC TS AND SURROUNDING CIRCUMSTANCES, DISCUSSED ABOVE. 6. THE NEXT ISSUE WHICH IS COMMON IN BOTH THE APPEA LS RELATES TO THE DISALLOWANCE MADE OUT OF EXPENDITURE INCURRED BY WA Y OF CASH. THE AO NOTICED THAT THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE IN CASH AND AMOUNT INCURRED ON EACH OCCASION WAS KEPT BELOW RS.20000/-, IN ORDE R TO ESCAPE FROM THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE AO HA S STATED THAT THE AGGREGATE AMOUNT OF CASH EXPENDITURE INCURRED IN THE HAND OF M/S HIGHLIGHT FILMS PVT. LTD WAS RS.59,58,804/- AND THE SAME WAS RS.18,87,021/- IN THE HANDS OF M/S HIGH LIGHT PICTURES (I) PVT. LTD. IN ORDER TO COVER UP DEFICIENCIES, THE AO DISALLOWED 25% OF THE ABOVE SAID AMOUNTS IN THE HANDS OF BOTH THE ASSESSEES, WHICH WAS ALSO CONFIRMED BY THE LD. CIT(A). 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE ASSESSEE HAVE INCURRED MAJOR PORTION OF THE EXPENDITURE BY WAY OF CHEQUE ONLY AND ONLY A SMALL PORTION OF THE EXPENDITURE WAS INCURRED BY WAY OF C ASH. IN RESPECT OF CASH PAYMENT MADE, HE SUBMITTED THAT THERE WAS NO VIOLAT ION OF SECTION 40A(3) OF THE ACT. HE FURTHER SUBMITTED THAT AGGREGATE AMOUNT OF CASH EXPENDITURE QUANTIFIED BY THE AO IN THE HANDS OF BOTH THE ASSESSEES WAS AL SO NOT CORRECT. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE M/S HIGH LIGHT PICTURES (I) PVT LTD. HAS INCURRED A SUM OF RS.3.39 LAKH ONLY BY WAY OF CASH, OUT OF TOTAL EXPENDITURE OF RS.4.66 CRORES. SIMILARLY, THE ASSESSEE M/S HIGHLI GHT FILMS PRIVATE LIMITED HAS INCURRED A SUM OF RS.33.34 LAKHS BY WAY OF CASH, OU T OF TOTAL EXPENDITURE OF RS.7.26 CRORES. ACCORDINGLY THE LD. AR SUBMITTED TH AT THE AGGREGATE AMOUNT OF EXPENDITURE INCURRED BY WAY OF CASH BY BOTH THE ASS ESSEES WORKED OUT TO LESS THAN 5% OF THE TOTAL EXPENDITURE INCURRED DURING TH E WHOLE OF THE YEAR. ACCORDINGLY, HE SUBMITTED THAT TAXING AUTHORITIES A RE NOT JUSTIFIED IN ADOPTING WRONG FIGURE AND FURTHER IN DISALLOWING 25% OF THER EOF. THE LD. COUNSEL FURTHER I.T.A. NO.7129/MUM/2012 AND 808/M/2013 5 SUBMITTED THAT THE ITAT HAS CONSIDERED AN IDENTICA L DISALLOWANCE MADE IN THE HANDS OF ASSESSEE M/S HIGH LIGHTS PICTURES (I) P VT. LTD V/S ACIT, IN ITA NO.5826/MUM/2011 RELATING TO THE AY-2008-09 AND THE TRIBUNAL, VIDE ITS ORDER DATED 30.8.2013, HAS REDUCED THE DISALLOWANCE TO 5% OF AGGREGATE AMOUNT OF CASH EXPENDITURE. THE LD. AR SUBMITTED THAT THE FAC TS AND CIRCUMSTANCES PREVAILING IN THE BOTH THE CASES UNDER CONSIDERATIO N ARE IDENTICAL TO THE ONE DECIDED BY THE TRIBUNAL AND ACCORDINGLY PRAYED THAT THE DISALLOWANCE MAY BE REDUCED TO 5% OF THE ACTUAL AMOUNT OF THE EXPENSES INCURRED BY WAY OF CASH. 8. WE HAVE HEARD THE LD.DR AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEES ARE DISPUTING THE QUANTUM OF EXPENDITURE DETERMINED BY THE AO. IN THE PAPER BOOK FILED BY BOTH THE ASSESSEES, A LIST OF TOTAL EXPENDITURE INCURRED, ALONG WITH THEIR BIFURCATION INTO CASH AND CHEQUE P AYMENTS ARE GIVEN. THE AGGREGATE AMOUNT OF CASH EXPENDITURE SHOWN IN THAT LIST DOES NOT TALLY WITH THE AMOUNT DETERMINED BY THE AO. HENCE, WE ARE OF THE VIEW THAT THE QUANTUM OF CASH EXPENDITURE INCURRED BY THESE ASSESSEES REQUIR ES VERIFICATION AT THE END OF THE AO. WITH REGARD TO THE DISALLOWANCE, WE NOTIC E THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS ALREADY CONFIRMED THE DISALLOWA NCE TO THE EXTENT OF 5% OF THE AGGREGATE AMOUNT OF CASH EXPENDITURE UNDER IDENTICA L SET OF FACTS, WHILE CONSIDERING THE APPEAL FILED BY ONE OF THE ASSESSE ES HEREIN. CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL , WE ALSO HOLD THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO 5% OF THE AGGR EGATE AMOUNT OF CASH EXPENDITURE. SINCE THERE IS A DISPUTE WITH REGARD TO THE QUANTUM OF CASH EXPENDITURE AND SINCE THE SAME REQUIRES VERIFICATIO N, WE SET ASIDE THE ORDER PASSED LD. CIT(A) ON THIS ISSUE IN THE HANDS OF BOT H ASSESSEES AND RESTORE THE SAME TO THE FILE OF THE RESPECTIVE AO WITH A DIRECT ION TO EXAMINE THE QUANTUM OF CASH EXPENDITURE INCURRED AND THEN DISALLOW 5% THE REOF. NEEDLESS TO MENTION, THE ASSESSEES SHOULD GIVEN PROPER OPPORTUNITY OF BE ING HEARD. 9. IN THE CASE OF HIGHLIGHT PICTURE (I) PVT LTD, THE SAID ASSESSEE HAS RAISED ONE MORE ISSUE RELATING TO DISALLOWANCE OF DEPRECIA TION ON PAINTING. WE NOTICE THAT THE AO HAD DISALLOWED DEPRECIATION CLAIMED BY THE ASSESSEE ON PAINTINGS. AN IDENTICAL DISALLOWANCE MADE IN THE HANDS OF THE ASSESSEE IN THE ASSESSMENT YEAR 2008-09 CAME UP FOR CONSIDERATION BEFORE THE C O-ORDINATE BENCH IN NO.5826/MUM/2011 (AY-2008-09) DATED 30.8.2013(SUPRA ). THE CO-ORDINATE I.T.A. NO.7129/MUM/2012 AND 808/M/2013 6 BENCH HAS DIRECTED THE AO TO ALLOW THE DEPRECIATIO N ON PAINTINGS AT THE RATE APPLICABLE TO FURNITURE AND FIXTURES AND IN THIS REGARD, THE TRIBUNAL HAS FOLLOWED THE DECISION RENDERED BY ANOTHER CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF BURNSIDE INVESTMENTS & HOLDINGS LTD. VS. DY. CIT ( 61 ITD 601). CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL, WE ALSO DIRECT THE AO TO ALLOW DEPRECIATION ON PAINTING AT THE RATE AP PLICABLE TO FURNITURE AND FIXTURES. THE ORDER OF THE LD.CIT(A) ON HIS ISSU E IS SET ASIDE ACCORDINGLY. 10. IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEES ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPE N COURT ON 17TH DEC, 2014. .! * / 0 1 2 17THDEC , 2014 ) ;+ < SD SD ( . / D. MANMOHAN ) ( . . ,/ B.R. BASKARAN) / VICE- PRESIDENT / ACCOUNTANT MEMBER * + MUMBAI: 17TH DEC,2014. . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. * =, ( ) / THE CIT(A)- CONCERNED 4. * =, / CIT CONCERNED 5. 6. >?; $, @ , - @ , * + / DR, ITAT, MUMBAI CONCERNED ; A+ / GUARD FILE. B * / BY ORDER, TRUE COPY & (ASSTT. REGISTRAR) - @ , * + /ITAT, MUMBAI