A V M Film Studios, CHENNAI v. ITO, CHENNAI

ITA 1359/CHNY/2015 | 2011-2012
Pronouncement Date: 31-07-2015

Appeal Details

RSA Number 135921714 RSA 2015
Assessee PAN AALFA3945K
Bench Chennai
Appeal Number ITA 1359/CHNY/2015
Duration Of Justice 1 month(s) 28 day(s)
Appellant A V M Film Studios, CHENNAI
Respondent ITO, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Bench Allotted A
Assessment Year 2011-2012
Appeal Filed On 02-06-2015
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH CHE NNAI . . ! ! ! ! ' ' ' ' # # # # $ $$ $ BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER & SHRI V. DURGA RAO JUDICIAL MEMBER I.T.A. NOS. 1358 & 1359/MDS/2015 ASSESSMENT YEAR: 2007-08 & 2011-12 M/S. AVM FILM STUDIOS NO. 38 ARCOT ROAD VADAPALANI CHENNAI 600 026. [PAN : AALFA3945K] VS. THE INCOME TAX OFFICER MEDIA WARD I CHENNAI. (APPELLANT) (RESPONDENT) %& ' ( /APPELLANT BY : MRS. J. SREE VIDYA ADVOCATE FOR MR. V.S. JAYAKUMAR ADVOCATE )*%& ' ( /RESPONDENT BY : SHRI P. RADHAKRISHNAN JCIT ' + /DATE OF HEARING : 23.07.2015 - ' + / DATE OF PRONOUNCEMENT : 31.07.2015 . . . . / O R D E R PER V. DURGA RAO JUDICIAL MEMBER : BOTH T HE APPEALS FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) 14 CHENNAI DATED 27.03.2015 RELEVANT TO THE ASSESSMEN T YEARS 2007-08 AND 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE M /S. AVM FILM STUDIO HAS BEEN CARRYING ON THE BUSINESS ACTIVITY OF RUNNING O F FILM STUDIO MAINTENANCE OF OLD MOVIES RIGHTS AND OTHER RELATED ACTIVITIES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS FILED ITS RETURN OF INCOME BY ADMITTING INCOME OF .2 163/-. THE ASSESSMENT WAS COMPLETED UNDER SECTIO N 143(3) OF THE I.T.A. I.T.A. I.T.A. I.T.A.NO NONO NOS SS S. .. .1358 & 1359 1358 & 1359 1358 & 1359 1358 & 1359/M/ /M/ /M/ /M/15 1515 15 2 INCOME TAX ACT 1961. THEREAFTER THE ASSESSMENT WA S REOPENED. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVE D THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAS RECEIVED AN AMOUNT OF .77 83 000/- FROM SALE OF FILM RIGHTS IN THE AVM PRODUCTIONS AND ENTE RTAINMENT. HOWEVER THE ASSESSEE FIRM HAS OFFERED ONLY .10 52 171/- AS CURRENT YEAR INCOME AND THE BALANCE AMOUNT OF .67 30 829/- IS NOT ADMITTED AS INCOME FOR THE CURR ENT YEAR CLAIMING THE SAME AS PRE-RECEIVED INCOME. FURT HER THE ASSESSEE HAS RECEIVED AN AMOUNT OF .15 75 000/- FROM ANOTHER UNIT AVM AUDIO WHICH WAS NOT OFFERED FOR TAXATION. THE AO COMPLETED THE ASSE SSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT BY DETERMINING THE TOT AL INCOME OF THE ASSESSEE AT .84 02 649/-. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE LD. CIT(A). THE LD. CIT(A) BY FOLLOWING THE ORDER OF HIS PREDECESSOR V IDE ITA NO.608//2010-11 DATED 23.07.2012 DECIDED THE ISSUE AGAINST THE ASS ESSEE BY OBSERVING THAT IT IS EVIDENT THAT THE SUM RECEIVED BY THE ASSESSEE IS NOT AN ADVANCE AND IT TAKES ONLY THE CHARACTER OF INCOME. THE NOMENCLATUR E USED BY THE ASSESSEE IS IMMATERIAL. ACCORDINGLY THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED. 4. ON BEING AGGRIEVED THE ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS FAIRLY ACC EPTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE I.T.A. I.T.A. I.T.A. I.T.A.NO NONO NOS SS S. .. .1358 & 1359 1358 & 1359 1358 & 1359 1358 & 1359/M/ /M/ /M/ /M/15 1515 15 3 DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09. 6. WE FIND THAT THE TRIBUNAL IN I.T.A. NO. 2000/MD S/2012 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 HAS CONSID ERED THE ISSUE AND HELD AS UNDER: 9. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE DECISIONS RELIED ON. THE ASSESSING OFFICER BROUGHT TO TAX THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE BEING LEASE AMOUNTS RECEIVED FOR GRANT OF RIGHTS OF EXPLOITATION DISTRIBUTION AND EXECUTION OF FILMS VIDEO COPY RIGHTS AND HOME VIDEO COPY RIGHTS ETC. DURING THIS ASSESSMENT YEAR HOLDING THAT THESE AMOUNTS ACCRUED TO THE ASSESSEE DURING THIS ASSESSMENT YEAR ONLY AND IT CANNOT BE SPREAD OVER DURING THE LEASE PERIOD. THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ACTION OF THE ASSESSING OFFICER HOLDING THAT RECEIPT PARTAKES THE CHARACTER OF ACCRUED AND RECEIVED DURING THE YEAR AND THEREFORE LIABLE T O BE TAXED IN THE YEAR OF RECEIPT. WHILE COMING TO SUCH CONCLUSION THE COMMI SSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- 8. I HAVE CAREFULLY CONSIDERED THE SUBMISSIO N OF THE AR. THE LOGIC: ADDUCED BY THE AR THAT THE TAX RATE FOR THE RELEVANT YEAR AND THE FUTURE YEARS IS THE SAME AND HENCE SPREAD OVER OF RECEIPT OF RS.2 65 28 535/- IS IN MY OPINION NOT A VALID ARGUM ENT FOR THE REASON THAT IF A RECEIPT FALLS WITHIN THE AMBIT OF INCOME THE SAME IS REQUIRED TO BE TAXED IN THE YEAR OF RECEIPT. THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS G.R. KARTHIKEYAN (201 I TR 866) HAS HELD THAT EVEN IF RECEIPT DOES NOT FALL WITHIN THE AMBIT OF ANY OF THE SUB-CLAUSES IN SECTION 2(24) IT MAY STILL BE INCO ME IF IT PARTAKES THE NATURE OF THE INCOME. FURTHER HON'BLE SUPREME COURT IN THE CASE OF EMIL WEBBER VS CIT (200 ITR 433) HELD THAT ANYTHING WHICH CAN BE PROPERLY DESCRIBED AS INCOME IS TAXABL E UNDER THE ACT UNLESS IT IS EXEMPTED UNDER ONE OR OTHER PROVISIONS OF THE ACT. THE SUM RECEIVED BY THE APPELLANT IS NEITHER ADVANCE NO R DEPOSIT BUT ONLY A CONSIDERATION FOR TRANSFER OF MOVIE RIGHTS W HICH HAS ACCRUED AND RECEIVED DURING THE RELEVANT FINANCIAL YEAR. TH EREFORE THE RECEIPT PARTAKE THE CHARACTER OF INCOME ACCRUED AND RECEIVED DURING THE YEAR AND HENCE LIABLE TO BE TAXED IN THE YEAR OF RECEIPT. THE NOMENCLATURE USED BY THE APPELLANT THAT THE REC EIPT IS 'PRE- RECEIVED' IS NOT BACKED BY ANY MATERIAL EVIDENCE AS THE APPELLANT HAS SOLD THE ENTIRE MOVIE RIGHT BELONGING TO THE UN DIVIDED FAMILY MEMBERS WHICH HAS BEEN ASSIGNED TO THE APPELLANT AN D DISSOLUTION I.T.A. I.T.A. I.T.A. I.T.A.NO NONO NOS SS S. .. .1358 & 1359 1358 & 1359 1358 & 1359 1358 & 1359/M/ /M/ /M/ /M/15 1515 15 4 OF THE EARLIER FIRM. THE ARGUMENT OF THE AR THAT TH E APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HENCE THERE IS JUSTIFICATION FOR SPREAD OVER OF INCOME TO FUTURE Y EARS IS DEVOID OF MERIT AS THE APPELLANT HAS PERFORMED HIS PART OF TH E CONTRACT OF SALE AND CONSIDERATION IS ALSO RECEIVED IN FULL AND HENC E THERE IS NO CASE FOR SPREADING OF INCOME TO FUTURE YEARS. THE RELIAN CE PLACED BY THE APPELLANT ON VARIOUS JUDGEMENTS IS ALSO MISPLACED S INCE THE APPELLANT ON SALE OF MOVIE RIGHTS HAS FULLY RENDERE D SERVICES AND HENCE ACCOUNTING OF INCOME PROPORTIONATELY IS NOT J USTIFIABLE. THEREFORE I HOLD THAT THE AO IS CORRECT IN BRINGING TO TAX AN AMOUNT OF .2 65 28 535/- AS INCOME AND I CONFIRM THE ADDITION . THEREFORE GROUNDS OF APPEAL ARE DISMISSED. 10. IN ONE OF THE AGREEMENTS ENTERED INTO BY THE AS SESSEE FOR ASSIGNING COPY RIGHTS OF VARIOUS FILMS WITH MOZER BEAR INDIA LTD. ON 8.9.2007 THE CLAUSE WITH RESPECT TO GRANT AND PERIOD OF ASSIGNME NT READS AS UNDER:- A) THE ASSIGNORS (COPYRIGHT HOLDER) HEREBY ASSIGN S TRANSFERS AND SELLS TO THE ASSIGNEE THE VIDEO COPYRIGHTS AND HOME VIDEO COPYRIGHTS OF 73 TAMIL FILMS AS MENTIONED IN SCHEDU LE 1 ABSOLUTELY IRREVOCABLY AND FREE FROM ANY ENCUMBRANCES / OBSTRU CTION FROM ANY PERSON/S PARTY/S COMPANY/S OR ORGANIZATION WH ATSOEVER FOR THE TERRITORY OF INDIA FOR A PERPETUAL AND PERMANEN T PERIOD. B) THE ASSIGNEE SHALL BE ENTITLED TO RE-ASSIGN LICE NSE AND/OR EXERCISE IN ANY OTHER MANNER EITHER BY ITSELF OR T HROUGH ANY THIRD PARTY OF ITS CHOICE THE RIGHTS ASSIGNED HEREUNDER WITHOUT ANY FURTHER REFERENCE TO THE ASSIGNOR (COPYRIGHT HOLDER ). 11. ON ENTERING INTO THIS AGREEMENT ASSESSEE HAS R ECEIVED .2 00 00 000/- DURING THE ASSESSMENT YEAR UNDER CON SIDERATION. AS COULD BE SEEN FROM THE ABOVE CLAUSE IT IS NOT FROM THE L EASE OF COPY RIGHTS BUT CLAUSE VERY SPECIFICALLY REFERS TO ASSIGNMENT TR ANSFER AND SALE OF HOME VIDEO COPY RIGHTS OF 73 TAMIL FILMS AS MENTIONED IN THE SCHEDULE ABSOLUTELY AND IRREVOCABLY FOR THE TERRITORY OF IN DIA FOR PERPETUAL AND PERMANENT PERIOD. WE ALSO FIND THAT CO-ORDINATE BEN CH OF THIS TRIBUNAL HAS CONSIDERED A SIMILAR SITUATION IN THE CASE OF S MT. G.KRISHNAMMAL VS. DCIT (SUPRA) WHEREIN IT WAS HELD AS UNDER:- THE ENTIRE AMOUNT RECEIVED BY THE ASSESSEE WAS NEI THER REFUNDABLE BY THE ASSESSEE NOR COULD BE CLAIMED BY THE LESSEES FROM THE ASSESSEE UNDER ANY CIRCUMSTANCES. AS PER A GREEMENT IN THE EVENT OF THE LESSEES VIOLATING ANY PART OF THE AGREEMENT BY DISTRIBUTING OR EXPLOITING THE RIGHTS OF THE FILM O UTSIDE THE TERRITORIES FOR WHICH THE RIGHTS WERE GRANTED THE LESSORS WOULD BE I.T.A. I.T.A. I.T.A. I.T.A.NO NONO NOS SS S. .. .1358 & 1359 1358 & 1359 1358 & 1359 1358 & 1359/M/ /M/ /M/ /M/15 1515 15 5 AT LIBERTY TO CANCEL THE AGREEMENT AND REPOSSESS TH E PRINTS AND FORFEIT ALL AMOUNTS PAID BY THE LESSES AND TO CLAIM FURTHER DAMAGES AS THE CASE MAY BE. THE SAID AMOUNT WAS NEITHER ADV ANCE NOR A DEPOSIT BUT WAS A PRICE PAID BY THE LESSEES TOWARDS THE COST OF EXPLOITATION DISTRIBUTION AND EXHIBITION RIGHTS OF THE FILM FOR FIVE YEARS. BY VIRTUE OF THE AGREEMENT WITH THE LESSEES THE ASSESSEE ACQUIRED THE RIGHT TO RECEIVE AND HAD ACTUALLY RECE IVED THE SUM OF RS. 2.10 LAKHS DURING THE RELEVANT YEAR. THE BIFURC ATION OF THIS AMOUNT FOR DIFFERENT PERIODS AS MENTIONED IN THE AG REEMENT HAD NO MEANING EXCEPT A CRUDE UNTENABLE DEVICE TO AVOID TA X BECAUSE SUCH A DEVICE HAD NO FOUNDATION AT ALL. SINCE THE A MOUNT WAS NEITHER REFUNDABLE BY THE ASSESSEE NOR THE ASSESSEE WAS BOUND TO PAY ANY INTEREST ON THAT SUM TO THE LESSEES AND THE AMOUNT WAS RECEIVED BY THE ASSESSEE FOR GRANT OF THE RIGHTS OF EXPLOITATION DISTRIBUTION AND EXHIBITION OF THE PICTURE THE SAI D SUM WAS THE ASSESSEE 5 INCOME WHICH HAD ACCRUED TO HER AND WHIC H HAD BEEN RECEIVED BY HER AND WAS CORRECTLY INCLUDIBLE IN HER TOTAL INCOME. IN VIEW OF SECTION 5(1) THE AMOUNT WAS CHARGEABLE T O TAX UNDER SECTION 4 APPORTIONMENT OF THE SAID SUM FOR FIVE Y EARS HAD NO MEANING BECAUSE THE TERMS OF THE AGREEMENT COULD NO T OVERRIDE THE PROVISIONS OF THE ACT ENACTED BY THE LEGISLATURE. THE ASSESSEE WAS THUS BIFURCATING THE TRADING RECEI PTS OF ONE YEAR INTO FIVE YEARS THEREBY SHIFTING THE PROFITS OF ONE YEAR INTO FIVE YEARS WHICH WAS NOT A CORRECT METHOD OF COMPUTING T HE PROFITS AND GAINS OF BUSINESS. WHEN THE ASSESSEE HAD DEBITED TH E ENTIRE COST OF ACQUISITION OF RIGHTS OF DISTRIBUTION EXPLOITATION AND EXHIBITION OF THE FILMS TO THE PROFIT AND LOSS ACCOUNT THERE WAS NO REASON WHY THE ENTIRE AMOUNT RECEIVED BY HER FROM THE LESSEES ON ACCOUNT OF SALE OF LEASE RIGHTS OF THE FILMS SHOULD NOT BE C REDITED TO THE PROFIT AND LOSS ACCOUNT IN ONE YEAR. THERE WAS NO ESTOPPEL S IN THESE MATTERS AND THE ASSESSING OFFICER WAS NOT BOUND BY THE INCORRECT METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE OR EV EN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS. THE ASSESSING OFFI CER THEREFORE CORRECTLY MADE ADDITION BECAUSE THE WHOLE AMOUNT HA D ACCRUED TO THE ASSESSEE AND RECEIVED BY HER IN ALL THE ACCOUNT ING YEARS. 12. RESPECTFULLY FOLLOWING THE SAID DECISION WE UP HOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE ENTIRE REC EIPTS DURING THE ASSESSMENT YEAR 2008-09. THE CASE LAWS RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. THUS THE GROUNDS RAISED BY THE ASSESSEE ARE REJECTED. I.T.A. I.T.A. I.T.A. I.T.A.NO NONO NOS SS S. .. .1358 & 1359 1358 & 1359 1358 & 1359 1358 & 1359/M/ /M/ /M/ /M/15 1515 15 6 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF T HE COORDINATE BENCH OF THE TRIBUNAL THE APPEAL FILED BY THE ASSESSEE IS D ISMISSED. 8. FOR THE ASSESSMENT YEAR 2011-12 ALSO THE ASSES SEE HAS FILED APPEAL RAISING SIMILAR GROUND ON IDENTICAL FACTS. IN VIEW OF THE ABOVE DECISION FOR THE ASSESSMENT YEAR 2007-08 THE APPEAL FILED BY THE AS SESSEE FOR THE ASSESSMENT YEAR 2011-12 IS ALSO DISMISSED. 9. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY THE 31 ST OF JULY 2015 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI DATED THE 31.07.2015 VM/- . ' )'+01 21-+ /COPY TO: 1. %& / APPELLANT 2. )*%& / RESPONDENT 3. 3 ( ) /CIT(A) 4. 3 /CIT 5. 14 )'+' /DR & 6. 5! 6 /GF.