Red Giant Movies, CHENNAI V. ITO, CHENNAI

ITA 923/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96170 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 03-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Court: TRIBUNAL
• Department Lawyers: S BHARATHCIT
• Assessee Lawyers: T VASUDEVAN
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.923/MDS/2015 ( / ASSESSMENT YEAR : 2010-11) M/S. RED GIANT MOVIES , 180,KODAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. INCOME TAX OFFICER, MEDIA WARD-1, CHENNAI-34. PAN AA JFR 5579 G ( &' / APPELLANT ) ( #(&' / RESPONDENT ) / APPELLANT BY : MR.T.VASUDEVAN,ADVOCATE / RESPONDENT BY : MR.S.BHARATH,CIT D.R / DATE OF HEARING : 03.09.2015 /DATE OF PRONOUNCEMENT : 14.10.2015 ) / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, CHENNAI DAT ED 27.03.2015 PASSED UNDER SECTION-263 READ WITH SECT ION 250 OF THE ITA NO. 923/MDS/15 2 ACT IN C.NO.10502(10)/263/CIT-10/14-15 FOR THE AS SESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS RAISED ELEVEN GROUNDS IN ITS A PPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT U/S.263 OF THE ACT WHO HAD DIR ECTED THE LD. ASSESSING OFFICER TO APPLY RULE-9A OF THE I.T RULES AND BRING TO TAX AN AMOUNT OF ` 15 LAKHS AS NOT RELATED TO THE PRODUCTION OF FILMS AADHAVAN. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A FIRM, ENGAGED IN PRODUCTION OF FILM, FILED ITS RETURN OF INCOME DECLARING INCOME AS ` 2,57,14,300/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ORDER PASSED U/S143(3) OF THE ACT AFTER MAKING CERTAIN DISALLOWANCES. SUBSEQUENTLY THE LD. CIT FOUND THAT THE ASSESSEE HAD DEBITED ` 15/- LAKHS IN ITS P&L ACCOUNT BEING THE AMOUNT PAID TO MR.SHENBAGAMURTHY, THE CO-PRODUCER OF THE FILM AAD HAVAN PRODUCED BY THE ASSESSEE. THE LD. CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSING TO REVISE THE ORDER PASSED B Y THE LD.A.O ITA NO. 923/MDS/15 3 UNDER U/S.143(3) OF THE ACT SINCE HE WAS OF THE OPI NION THAT THE PAYMENT MADE TO MR.SHENBAGAMURTHY FOR ` 15 LAKHS IS NOT GENUINE BECAUSE THERE WAS NOTHING ON RECORD TO ESTABLISH TH E NATURE OS SERVICE RENDERED AND THEREFORE THE ORDER OF THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. DURING THE COURSE OF HEARING, THE LD. A.R. HAD MADE THE FO LLOWING SUBMISSIONS BEFORE THE LD.CIT :- (I) THE ASSESSEE HAD PAID REMUNERATION OF ` 15/- LAKHS TO THE CO- PRODUCER FOR RENDERING THE SERVICE AS PRODUCTION CO NTROLLER FOR THE MOVIE AADHAVAN. (II) THE DUTIES OF MR.SHENBAGAMURTHY WERE TO REPR ESENT THE FIRM IN MONITORING AND ADMINISTRATION OF THE DAY TO TODAY A CTIVITIES OF THE SHOOTING, STORY DISCUSSION, SELECTION OF ARTISTS, F IXING LOCATION FOR SHOOTING, VERIFICATION AND APPROVAL OF VARIOUS EXPE NDITURE INCURRED IN CONNECTION WITH PRODUCTION OF THE FILM, ORGANIZING THE SHOOTING TEAM ETC., (III) THE SERVICES OF MR.SHENBAGAMURTHY STARTS FROM INITIAL PRODUCTION STAGE TILL THE RELEASE OF THE FILM INCLU DING THE EXHIBITION OF FILM IN THEATERS. ITA NO. 923/MDS/15 4 (IV) THE ASSESSEE HAD ALSO DEDUCTED 10% OUT OF ` 15/- LAKHS PAYMENT MADE TO MR.SHENBAGAMURTHY U/S.194J OF THE A CT. (V) THE ENTIRE AMOUNT OF ` 15/- LAKHS PAID TO MR.SHENBAGAMURTHY WAS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE A SSESSES BUSINESS. (VI) DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E LD. ASSESSING OFFICER HAD SPECIFICALLY QUESTIONED THE A BOVE SAID PAYMENT OF ` 15/- LAKHS WHICH WAS SATISFACTORILY EXPLAINED TO HI M. 4. HOWEVER, THE LD. CIT HELD THE ORDER OF THE LD. ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE WITHIN THE MEANING OF SECTION-263 OF THE ACT BY OBS ERVING AS UNDER:- FROM A PERUSAL OF THE P&L A/C OF THE ASSESSEE FOR THE RELEVANT PERIOD, IT IS SEEN THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.18,12,76,506/- TOWARDS COST OF PRODUCTION AADHAVAN. THE BREAK- UP OF THE SAME UNDER BROAD HEADINGS HAS BEEN SHOWN IN SCHEDULE-13 TO THE ACCOUNTS. IT IS SEEN THAT THIS SCHEDULE INCLUDES VARIOUS HEADS SUCH AS O FFICE AND ADMINISTRATION EXPENSES, ARTIST REMUNERATION, TECHNICAL REMUNERATI ON, SHOOTING EXPENSES AND SO ON. WHEN THE ASSESSEE HAS ALREADY CLAIMED RS .18.12 CR.(APPROX) TOWARDS COST OF PRODUCTION OF THE FILM AADHAVAN, IT IS NOT CLEAR AS TO HOW A PAYMENT OF RS.15 LAKHS TO MR M SHENBAGAMOORTHY, CO- PRODUCER, FOR SERVICES RENDERED TOWARDS PRODUCTION OF THE SAME FI LM, DEBITED AS A SEPARATE ENTRY IN THE P&L ACCOUNT, IS JUSTIFIED ITA NO. 923/MDS/15 5 THE ASSESSING OFFICER HAS FAILED TO LOOK INTO THI S ASPECT, WHILE COMPLETING THE ASSESSMENT. BEING A PERSONAL ACCOUNT , THE DEBIT OF A SUM OF RS.15 LAKHS CANNOT BE TREATED AS REVENUE EXPENDITUR E IN THE HANDS OF THE FIRM. THIS BEING THE CASE, THE ASSESSING OFFICER SH OULD NOT HAVE BLINDLY ACCEPTED THE ENTRY IN THE LEDGER ACCOUNT TOWARDS PA YMENT MADE TO MR.SHENBAGAMOORTHY, WITHOUT LOOKING INTO THE NATURE OF THE SERVICES RENDERED BY HIM AND ITS CO-RELATION TO THE PRODUCTI ON OF THE FILM AADHAVAN. HENCE, ON ACCOUNT OF THE FAILURE ON THE PART OF T HE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRIES INTO THE EXACT NATURE OF SERVICES RENDERED BY THE SAID MR.SHENBAGARNOORTHY, THE ASSESSMENT ORDER PASS ED IS ERRONEOUS AND HENCE PREJUDICIAL TO THE INTERESTS OF REVENUE, WITH IN THE MEANING OF SEC.263 OF THE ACT. 5. THE LD. A.R. ARGUED BEFORE US BY STATING THAT T HE PAYMENT MADE TO MR.SHENBAGAMURTHY IS GENUINE AND IT IS FOR THE SERVICES RENDERED BY HIM TO THE ASSESSEE FIRM AGAINST WHICH SUCH PAYMENT IS MADE. ON THE OTHER HAND, LD. D.R ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. WHILE PRODUCING A M OVIE, THE SERVICE OF AN EXPERIENCE PERSON IS REQUIRED TO MANAGE THE E NTIRE EVENTS RIGHT FROM THE BEGINNING TILL THE END OF THE PROJECT. FI RM BY ITSELF CANNOT MANAGE THE AFFAIRS OF THE PRODUCTION BUT CAN FUNCTI ON ONLY THROUGH ITA NO. 923/MDS/15 6 SOME EXPERIENCED AND RESPONSIBLE PERSONNEL. IN THI S CASE, THE CO- PRODUCER IS AUTHORIZED BY THE FIRM TO OVERSEE ALL T HE ABOVE MENTIONED ACTIVITIES. PAYMENTS MADE BY THE FIRM TO AN EXPERIE NCED INDIVIDUAL FOR RENDERING SUCH SERVICES CANNOT BE CONSIDERED AS NOT GENUINE OR UNNECESSARY JUST BECAUSE HE IS THE CO-PRODUCER OF T HE FILM ALONG WITH THE ASSESSEE FIRM. FURTHER, THE ASSESSEE HAS COMPL IED WITH THE PROVISIONS OF SECTION.194J OF THE ACT AND PROMPTLY DEDUCTED TAX AND REMITTED THE SAME TO THE GOVERNMENT TREASURY WHICH IS NOT DISPUTED. MOREOVER, RULE 9A OF THE RULES WILL NOT BE APPLICAB LE IN THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE HAS DECLARED INCO ME OF ` 24,43,16,163/- BY EXHIBITING THE FILM AADHAVAN DU RING THE RELEVANT ASSESSMENT YEAR 2010-11. FURTHER THE LD.A.R HAS SUB MITTED BEFORE US THAT THIS ISSUE HAD BEEN ARGUED AT LENGTH BEFORE THE LD.A.O WHO HAD FINALLY ACCEPTED THE CLAIM OF THE ASSESSEE AFTE R HEARING THE MATTER AND THE SAME IS ALSO NOT DISPUTED BY THE REV ENUE. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCE OF THE CASE WE DO NOT FIND ANY MERIT IN THE ORDER OF THE LD.CIT FOR DIRECTING THE LD. ASSESSING OFFICER TO DISALLOW THE PAYMENT MADE TO MR.SHENBAGAMURTHY. HENCE WE ITA NO. 923/MDS/15 7 HEREBY SET-ASIDE THE ORDER OF THE LD.CIT PASSED U/S . 263 OF THE ACT AND THERE BY UPHOLD THE ORDER OF THE LD.A.O. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 14 TH OCTOBER, 2015 AT CHENNAI. SD/- SD/- ( !' # ) ((CHALLA NAGENDRA PRASAD) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 14 TH OCTOBER, 2015. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FIL