ACIT, New Delhi V. Planman Consulting India (P) Ltd., New Delhi

MA 101/DEL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9138 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M BARNWAL
• Assessee Lawyers: VED JAIN CA SH ASHISH JAIN
• Keywords: Business expenditure; Tax effect; TDS
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, FRIDAY: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER MA NO.101/DEL/2019 (ARISING OUT OF ITA NO.5050/DEL/2015) [ASSESSMENT YEAR: 2012-13] ACIT, CENTRAL CIRCLE-3, NEW DELHI PLANMAN MOTION PICTURES (P) LTD. 48, COMMUNITY CENTRE, NARAINA INDL. AREA, PHASE-I, NEW DELHI PAN-AAACP7705M REVENUE ASSESSEE ITA NO.5050/DEL/2015 [ASSESSMENT YEAR: 2012-13] ACIT, CENTRAL CIRCLE-3, NEW DELHI PLANMAN MOTION PICTURES (P) LTD. 48, COMMUNITY CENTRE, NARAINA INDL. AREA, PHASE-I, NEW DELHI PAN-AAACP7705M REVENUE ASSESSEE REVENUE BY SH. M. BARNWAL, SR. DR ASSESSEE BY SH. VED JAIN, CA SH. ASHISH JAIN, CA DATE OF HEARING 23.07.2021 DATE OF PRONOUNCEMENT 03.08.2021 2 MA NO.101/DEL/2019 ORDER PER R.K. PANDA, AM, THE REVENUE, THROUGH THIS MISCELLANEOUS APPLICATION HAS REQUESTED THE TRIBUNAL TO RECALL THE ORDER OF THE T RIBUNAL IN ITA NO.5050/DEL/2015, DATED 02.08.2018 ON THE GROUND TH AT THE TRIBUNAL HAS DISMISSED THE APPEAL OF THE REVENUE MI STAKENLY TAKING TAX EFFECT AS BELOW THE MONETARY LIMIT FOR F ILING APPEAL BEFORE THE TRIBUNAL WHILE THE TAX EFFECT INVOLVED I N THE PRESENT APPEAL IS RS.22,27,383/-. 2. THE LEARNED DR REFERRING TO THE CONTENTS OF THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE DREW THE ATTENTION OF THE BENCH TO THE SAME WHICH READS AS U NDER:- IN THIS CASE, THE ASSESSEE COMPANY HAS FILED ITS R ETURN OF INCOME ON 29.09.2012 DECLARING LOSS INCOME OF RS. 3,12,17,376 /-AND REGULAR ASSESSMENT U/S 143(3) WAS COMPLETED ON A TOTAL LOSS INCOME OF RS. 2,35,38,083/- THE MAIN ADDITIONS/DISALLOWANCES WERE MADE IN THE A SSESSMENT ORDER AS UNDER: DISALLOWANCE OF INTEREST PAID ON LATE DEPOSIT OF TDS RS. 5,04,636/ - DISALLOWANCE OF EMPLOYEES SALARIES RS. 35,8 2,508/- DISALLOWANCE ON ADVERTISEMENT EXPENSES RS. 35,92,149/- 1. DISALLOWANCE OF INTEREST PAID ON LATE DEPOSIT OF TD S RS. 5,04,636/- THE AO WHILE MAKING THE DISALLOWANCE OF INTEREST PA ID ON LATE DEPOSIT OF TDS OF RS 5,04,636/- OBSERVED THAT: 3 MA NO.101/DEL/2019 IT HAS BEEN OBSERVED FROM THE P&L A/C THAT THE ASS ESSEE HAD DEBITED RS.3,84,318/- UNDER THE HEAD INTEREST ON TDS, RS. 86,613/- UNDER THE HEAD INTEREST ON VAT AND RS.33,705/- UNDER THE HEAD I NTEREST ON SERVICE TAX. AS PER SEC 37 OF I.T. ACT, 1961 ANY INTEREST, PENAL TY, FINE PAID IS DISALLOWED IF IT IS PAID FOR THE VIOLATION OF ANY LAW. INTEREST ON L ATE PAYMENT OF TDS IS LEVIED UNDER SECTION 201(IA) OF THE INCOME TAX ACT, 1961. THE SAID EXPENDITURE WILL NOT BE ALLOWED AS A BUSINESS EXPENDITURE VIDE MADRA S HIGH COURT DECISION IN CIT VS. CHENNAI PROPERTIES & INVESTMENTS LTD. REPOR TED IN 239 ITR 435. THEREFORE, THE SAME SHALL NOT BE ALLOWED TO THE ASS ESSEE AND AMOUNT OF RS.3,84,318/- IS ADDED TO THE TOTAL INCOME OF THE A SSESSEE. ON THE SIMILAR GROUNDS INTEREST ON LATE PAYMENT OF VAT AND SERVICE TAX SHALL NOT BE ALLOWED TO THE ASSESSEE COMPANY AND RS.86,613/- AND RS. 33,705 /- SHALL BE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE ABOVE INTEREST AMOUNTING TO RS. (384318+86613+33705) HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE DURING THE YEAR. THE ASSESSEE COMPANY PREFERRED APPEAL BEFORE THE LD .CIT(A) ON THIS ISSUE. LD.CIT(A) DELETED RS. 33,705/- OUT OF THE TOTAL DIS ALLOWANCE MADE OF RS. 5,04,636/- IN RESPECT OF INTEREST FOR LATE DEPOSIT OF SERVICE TAX BY OBSERVING AS UNDER: THE HONBLE HIGH COURT IN THE CASE OF CIT 1/S. MES SEE DUSSELDORF INDIA PVT. LTD.(129 TJ 81 DEL) AND THE HONBLE ITAT IN TH E CASE OF REMFRY AND SAGAR CONSULTANTS PVT LTD OBSERVED THAT INTEREST ON LATE PAYMENT OF SERVICE TAX IS COMPENSATORY IN NATURE AND ALLOWABLE AS DEDU CTION. IN VIEW THEREOF THE ADDITION OF RS. 33705/- IS DELETED. THEREFORE, THE GROUND NO.3 IS PARTLY RULED IN FAVOUR OF THE APPELLANT. THE DECISION OF THE LD.CIT(A) WAS ACCEPTED ON THIS GROUND AS LATE PAYMENT OF SERVICE TAX IS COMPENSATORY IN NATURE AND ALLOWA BLE AS DEDUCTION. NO SECOND APPEAL WAS RECOMMENDED BY THE DEPARTMENT ON THIS ISSUE. 2. DISALLOWANCE OF EMPLOYEES SALARIES OF RS. 35,82,508 /- THE AO MADE DISALLOWANCE OF EMPLOYEES SALARIES OF R S. 35,82,508/- BY OBSERVING AS UNDER: DURING THE YEAR THE ASSESSEE COMPANY HAS NOT RELEAS ED ANY MOVIE AND ALSO THE COMPANY IS SHOWING THE MOVIES UNDER DEVELOPMENT MOVIES IN INVENTORY/ WIP. THE ASSESSEE HAS CLAIMED RS.1,43,71,182/- UNDE R THE HEAD SALARIES AND INCENTIVES. OUT OF THE ABOVE CLAIMED EXPENSES, EXPE NSES AMOUNTING TO RS.35.82.508/- HAS BEEN PAID TO THE FOLLOWING EMPLO YEES FOR RENDERING MOVIE PRODUCTION SERVICES AS FOLLOWS:- NAME OF THE EMPLOYEE NATURE OF SERVICE RENDERED AMOUNT 1.KARUN PUNCHI PRODUCTION & COLLABORATIONS RS. 14, 16,508/- 2.NITINPANDYA DISTRIBUTION RS. 9,24,750/- 3.SREESHA NAIR PRODUCTION & COLLABORATIONS RS. 12, 41,250/ - TOTAL RS.35,82.508/- 4 MA NO.101/DEL/2019 THE ABOVE EXPENSES ARE PAID BY THE ASSESSEE FOR A M OVIE WHICH HAS NOT BEEN RELEASED DURING THE YEAR. ON EXAMINATION IT HAS BEE N NOTICED THAT THE ABOVE EXPENSES SHOULD BE SHOWN IN THE INVENTORY/ WIP DURI NG THE YEAR. THE EXPENSES SHALL NOT BE ALLOWED TO THE ASSESSEE COMPANY SINCE THESE EXPENSES ARE FOR MOVIE MAKING AND THE MOVIE HAS NOT BEEN COMPLETED/U NDER PROCESS. THEREFORE, THE ABOVE EXPENSES OF RS. 35,82,508/ - ARE DISALLOW ED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE DURING THE YEAR. THE LD.CIT(A) HAD DELETED THE ADDITION OF RS. 35,82 ,508/- BY OBSERVING AS UNDER: THE APPELLANT STATED THAT THESE WERE EXPENSES PAID IN THE NORMAL COURSE OF BUSINESS. I AM OF THE VIEW THAT EVEN IF THE MOVIE WAS NOT REL EASED DURING THE YEAR, PRODUCTION AND OTHER EXPENSES WOULD HAVE TO BE INCU RRED. THE THREE PERSONS WERE EMPLOYED BY THE COMPANY AND THEY WOULD HAVE TO BE PAID SALARIES. THE EXPENDITURE IN MY VIEW IS ALLOWABLE AS A REGULAR BU SINESS EXPENDITURE. THE ADDITION OF RS.35,82,508/- IS DELETED. THE GROUND O F APPEAL IS RULED IN FAVOUR OF THE APPELLANT. THE ORDER OF THE LD.CIT(A) WAS NOT ACCEPTABLE IN VI EW OF THE FACT THAT THE ASSESSEE ITSELF HAS CAPITALIZED THE EXPENDITURE REL ATED TO THE PRODUCTION OF MOVIES UNDER THE HEAD INVENTORY/WIP. BY APPLYING THE SAME YARDSTICK, THE EXPENDITURE INCURRED ON SALARIES AND INCENTIVES REL ATED TO MOVIE PRODUCTION WERE REQUIRED TO BE CAPITALIZED UNDER THE SAME HEAD . AS SUCH SECOND APPEAL WAS FILED BEFORE HONBLE ITAT . 3. ADDITION OF RS. 35,92,149/- IN RESPECT OF ADVERTISE MENT EXPENSES. THE AO WHILE MAKING THE DISALLOWANCE OF RS.35,92,24 9 IN RESPECT OF ADVERTISEMENT EXPENSES HAD OBSERVED AS UNDER: IT HAS BEEN OBSERVED FROM P&L A/C THAT THE ASSESSE E COMPANY HAS DEBITED RS.35,92,149/- UNDER THE HEAD ADVERTISEMENT EXPENS ES. THE ASSESSEE VIDE ORDER SHEET DATED 14.01.2015 WAS ASKED TO PROVIDE J USTIFICATION OF ADVERTISEMENT EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSEE VIDE HIS LETTER DATED 20.01.2015 STATED THAT 'THE ADVERTISEMENT EXP ENSES WERE INCURRED FOR COMPLYING THE COMMITMENT IT MADE AT THE SELLING OF RIGHTS OF DO DOONI CHAAR. THESE EXPENSES WERE NECESSARY TO BE INCURRED. THE SUBMISSION MADE BY THE ASSESSEE HAS NOT BEEN FO UND TENABLE BECAUSE THE MOVIE DO DOONI CHAAR WAS RELEASED ON 8TH OCTOBER 20 10 I.E IN FINANCIAL YEAR 2010-11. THE ASSESSEE COMPANY HAS CLAIMED THE EXPEN SES IN FINANCIAL YEAR 2011-12 WHICH ARE NOT JUSTIFIED. EXPENSES PERTAININ G THE PREVIOUS YEAR SHALL NOT ALLOWED TO BE CLAIMED IN THE CURRENT YEAR. THER EFORE, IN ORDER TO PROTECT THE INTEREST OF THE REVENUE AND IN ORDER TO STOP ANY PO SSIBLE LEAKAGE EXPENSES 5 MA NO.101/DEL/2019 CLAIMED ABOVE ARE DISALLOWED AND ADDED BACK TO THE RETURNED INCOME OF THE ASSESSEE DURING THE YEAR. IN VIEW OF THE ABOVE, AMO UNT OF RS. 35,92,149/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE DURING THE YEAR. THE LD.CIT(A) DELETED THE ADDITION BY RELYING ON TH E DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. CASIO IND IA LTD AND IN THE CASE OF C1T VS. SALORA INTERNATIONAL LTD (308 ITR 199). THE DECISION OF THE LD.CIT(A) WAS NOT ACCEPTED IN V IEW OF THE FACT THAT THE ASSESSEE HAD NOT PROVIDED ANY EVIDENCE TO ESTABLISH THAT THE EXPENSES HAVE BEEN INCURRED FOR EARNING OF INCOME FROM THE MOVIE DO DOONI CHAR WHICH WAS RELEASED IN THE YEAR 2010-11. THE LD, CIT(A) HA D ALSO RELIED UPON THE RATIO OF JUDGMENTS MENTIONED ABOVE WERE NOT APPLICA BLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE THEREFORE, SECOND APPEAL WAS RECOMMENDED ON THIS ISSUE AS WELL BY THE DEPARTMENT: BEFORE HONBLE ITAT; OVERALL THE REVENUE FILED APPEAL BEFORE HONBLE ITA T ON FOLLOWING GROUNDS: (I) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 35,82,508 ON ACCOU NT OF SALARY AND INCENTIVES PAID TO MOVIE PRODUCTION STAFF WHICH WAS OTHERWISE REQUIRED TO BE CAPITALIZED DUE TO THE FACT THAT THE MOVIES WERE STILL UNDER PR ODUCTION AND NOT RELEASED DURING THE YEAR UNDER CONSIDERATION AND OTHER EXPEN DITURE HAD ITSELF BEEN CAPITALIZED BY THE ASSESSEE. (II) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS. 35,92,149/- BEING EXPENSES RELATED TO INCOME EARNED IN THE EARLIER YE ARS AND NOT IN THE YEAR UNDER CONSIDERATION. 4. THE HONBLE ITAT VIDE ITS ORDER APPEAL NO. ITA NO. 5050/DEL/2015 DATED 02.08.2018 DISMISSED THE APPEAL OF THE REVENUE IN V IEW OF THE CBDT CIRCULAR NO. 3 OF 2018 DATED 11.07.2018 TAKING VIEW THAT THE TAX EFFECT INVOLVED IN PRESENT CASE IS BELOW THE MONETARY LIMI T FOR FILING APPEAL BEFORE ITAT. THE DECISION OF HONBLE ITAT IS NOT ACCEPTABLE ON M ERITS AS WELL AS ON FACTS AS HONBLE ITAT HAS MENTIONED IN ITS DECISION THAT TAX EFFECT INVOLVED IN THE APPEAL IS BELOW THE MONETARY LIMIT FOR FILING APPEA L BEFORE HONBLE ITAT. IT IS HEREBY MENTIONED THAT TAX EFFECT IN THIS APPEAL IS RS. 22,27,383/-, THE SAME IS ABOVE THE MONETARY LIMIT OF RS. 20,00,000/- FOR FILING APPEAL BEFORE HONBLE ITAT. SINCE THERE IS A MISTAKE APPARENT FROM RECORD IN TH E ORDER OF HONBLE ITAT, THEREFORE, IN VIEW OF THE ABOVE, MISCELLANEOUS APPL ICATION IS BEING FILED IN THIS CASE AGAINST THE ORDER OF THE HONBLE ITAT DAT ED 02.08.2018 ON THE FOLLOWING GROUNDS:- 6 MA NO.101/DEL/2019 THAT THE HONBLE ITAT HAS DISMISSED THE APPEAL OF THE REVENUE MISTAKENLY TAKING TAX EFFECT AS BELOW THE MONETARY LIMIT FOR F ILING APPEAL BEFORE THE HONBLE ITAT WHILE THE TAX EFFECT INVOLVED IN THIS APPEAL IS RS. 22,27,383/-I.E WELL ABOVE THE MONETARY LIMIT OF RS. 20,00,000/- FO R FILING APPEAL BEFORE THE HONBLE ITAT AS PER CBDT CIRCULAR 3/2018 DATED 11.0 7.2018. 3. REFERRING TO THE ABOVE, HE SUBMITTED THAT THE S AME IS SELF EXPLANATORY AND THEREFORE, THE BENCH SHOULD PA SS APPROPRIATE ORDER AS PER LAW. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, HAS NO OBJECTION FOR RECALLING OF THE ORDER P ASSED BY THE TRIBUNAL. HE HOWEVER, SUBMITTED THAT THE APPEAL FIL ED BY THE REVENUE HAS TO BE DISMISSED ON ACCOUNT OF LOW TAX E FFECT EVEN AFTER RECALLING OF THE ORDER. 5. AFTER HEARING BOTH THE SIDES, WE FIND THE TRIBU NAL WHILE DECIDING THE APPEAL FILED BY THE REVENUE HAS DISMISSED THE APPEAL OF THE REVENUE MISTAKENLY TAKING THE TAX EFFECT AS BELOW THE MONETARY LIMIT FOR FILING APPEAL BEFORE T HE TRIBUNAL. WE FIND THE TAX EFFECT INVOLVED IN THE PRESENT APPE AL IS RS.22,27,383/-. THEREFORE, CONSIDERING THE CBDT CIR CULAR 3/2018 DATED 11.07.2018, WE ARE OF THE CONSIDERED O PINION THAT A MISTAKE HAS CREPT IN THE ORDER OF THE TRIBUN AL. WE, THEREFORE, RECALL THE ORDER OF THE TRIBUNAL AND THE MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS A LLOWED. 7 MA NO.101/DEL/2019 ITA NO.5050/DEL/2015 6. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS BELOW THE PRESCRIBED MONETARY LIMIT OF RS.50 LAKHS. 7. THE CBDT VIDE CIRCULAR NO.17/2019 DATED 08.08.2019 HAS REVISED THE MONETARY LIMIT FOR FILIN G THE APPEALS BEFORE THE TRIBUNAL TO RS.50 LACS. FURTHER, CBDT V IDE LETTER DATED 20.08.2019 HAS ALSO CLARIFIED THAT CIRCULAR N O.17/2019 WOULD BE APPLICABLE TO ALL PENDING APPEALS. IN SUC H CIRCUMSTANCES, THE PRESENT APPEAL FILED BY THE REVE NUE ON ACCOUNT OF LOW TAX EFFECT IS NOT MAINTAINABLE. 8. BEFORE PARTING OF THE ORDER, WE CLARIFY HERE THAT THE REVENUE SHALL BE AT LIBERTY TO APPROACH THE TRIBUNA L FOR RE- INSTITUTION OF THE APPEAL, IF THE REQUISITE MATERIA L IS BROUGHT TO SHOW THAT THE APPEAL IS PROTECTED BY THE EXCEPTIONS PRESCRIBED IN PARA-10 OF THE CIRCULAR DATED 11.07.2018. 9. IN CONCLUSION, BY APPLYING THE CBDT CIRCU LAR DATED 08.08.2019 AND LETTER DATED 20.08.2019 (SUPRA), THE CAPTIONED APPEAL OF THE REVENUE IS DISMISSED. 8 MA NO.101/DEL/2019 10. IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE REVENUE IS ALLOWED AND THE APPEAL FILED BY THE REVE NUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 03/08/2 021. SD/- SD/- [SUCHITRA KAMBLE] [R.K.PA NDA] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 03/08/2021. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI