ACIT RG 11(1), MUMBAI v. J. SUGHAND PRODUCTIONS, MUMBAI

ITA 652/MUM/2009 | 2005-2006
Pronouncement Date: 16-07-2010 | Result: Dismissed

Appeal Details

RSA Number 65219914 RSA 2009
Assessee PAN AABCS6222Q
Bench Mumbai
Appeal Number ITA 652/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 14 day(s)
Appellant ACIT RG 11(1), MUMBAI
Respondent J. SUGHAND PRODUCTIONS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 16-07-2010
Date Of Final Hearing 08-07-2010
Next Hearing Date 08-07-2010
Assessment Year 2005-2006
Appeal Filed On 02-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI PRAMOD KUM AR (AM) ITA NO.652/MUM/2009 ASSESSMENT YEAR : 2005-06 ASSTT. COMMISSIONER OF INCOME TAX -11(1) ROOM NO.439 AAYAKAR BHAVAN M.K. MARG MUMBAI-20. ..( APPELLANT ) VS. M/S. J. SUGHAND PRODUCTIONS PVT. LTD. 17/6 RAMAKRISHNA C.H.S. GULMOHAR CROSS ROAD NO.12 J.V.P.D. SCHEME MUMBAI-400 049. ..( RESPONDENT ) P.A. NO. (AABCS 6222 Q) APPELLANT BY : SHRI HARI GOVING SINGH RESPONDENT BY : SHRI R. PRASAD RAO O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 29.10.2008 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF PRODUCTION AND DISTRIBUTION AND FINANCERS OF FILMS. IT FILED RETURN DECLARING LOSS OF RS.59 70 080/ -. DURING THE COURSE OF ASSESSMENT IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER ITA NO.652/M/09 A.Y:05-06 2 THAT THE ASSESSEE HAS DEBITED UNDER THE HEAD ROYALTY FO R THE FILM HUM DIL DE CHUKE SANAM RS. 30.00 LACS AND UNDER THE HE AD ROYALTY FOR THE SALE OF VIDEO RIGHTS RS. 1 42 857/-. THE ASSESSE E WAS ASKED TO PROVIDE DETAILS OF TDS. THE ASSESSEE VIDE LETTER DAT ED 11.12.2007 SUBMITTED AS UNDER ( PAGE 4 OF ASSESSMENT ORDER ):- AS REGARDS AN ITEM ROYALTY IN THE P&L A/C. WE HA VE TO SUBMIT THAT THERE IS A WRONG HEAD GIVEN TO THE EXPENDITURE. WE REGRET THIS MISTAKE. IT IS ACTUAL LY THE 50% SHARE OF PROFIT/OVERFLOW GIVEN TO M/S. BHANSALI PRODUCTIONS FOR THE FILM HUN DIL DE CHUKE SANAM. DURING THE YEAR WE HAVE CREDITED THE P&L A/C. BY RS.60.00 LACS AS INCOME FROM THE FILM HUM DIL DE CH UKE SANAM. AS PER THE AGREEMENT BETWEEN THE COMPANY AN D M/S. BHANSALI PRODUCTIONS 50% OF THE RECEIPTS ON T HE SALE OF SATELLITES AND VIDEO RIGHTS TO BE PAID TO M /S. BHANSALI PRODUCTIONS. THIS IN OUR OPINION DOES N OT ATTRACT TDS. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXPLANATION AND HE WAS OF THE VIEW THAT IN BOTH CASES BE IT ROYALTY OR AN OVERFLOW PAYMENT ASSESSEE SHOULD HAVE DEDUCTED TDS WH ILE PAYING TO M/S. BHANSALI PRODUCTION. IN FACT AS MENTIO NED BY THE ASSESSEE IT WAS AN AGREEMENT/CONTRACT WHICH WAS ENTERED I NTO BY BOTH THE PARTIES. THE CONSIDERATION IS PURELY FOR THE SERVICE RENDERED BY M/S. BHANSALI PRODUCTIONS TO THE ASSESSEE. IN LIEU OF ABOVE PROVISION OF SECTION 40(A)(I) IS HEREBY ATTRACTED AND TH US HE DISALLOWED TOTAL AMOUNT OF RS.31 42 857/- (RS.30 00 000/- + RS.1 42 857/-) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEA L IT WAS SUBMITTED BY THE ASSESSEE THAT THE DEBIT TO THE PROFIT A ND LOSS ACCOUNT ITA NO.652/M/09 A.Y:05-06 3 OF RS.31 42 857/- WAS A BOOK ENTRY BASED ON PREVIOUS A SSESSMENT DONE FOR ASSESSMENT YEAR 2002-03. IT WAS ACTUALLY 50% OF THE SHARE OF PROFIT AGAINST THE INCOME CREDITED TO THE PROFIT A ND LOSS ACCOUNT. THIS DID NOT ATTRACT TDS. THE LD. CIT(A) HAS HELD VI DE PARA 5.3 OF HIS ORDER AS UNDER :- 5.3 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND T HE MATERIALS ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER IS NOT SURE WHETHER IT IS A ROYALTY PAYMENT OR OVER FLOW PAYMENT. SECTION 40(A)(I) DEALING WITH ROYALTY IS RELATABLE TO PAYMENTS OUTSIDE INDIA OR IN INDIA TO A NON- RESIDENT NOT BEING A COMPANY OR TO A FOREIGN COMPAN Y. THEREFORE CLEARLY SECTION 40(A)(I) IS NOT APPLICAB LE. THE CONCEPT OF ROYALTY U/S.40(A)(IA) WAS INTRODUCED W.E .F. 1.4.2006. THEREFORE THIS IS ALSO NOT APPLICABLE S INCE THE ASSESSMENT YEAR IS 2005-06. AS FAR AS OVERFLOW PAY MENT IS CONCERNED THE PAYMENT HAS TO BE IN TERMS OF AGREEMENT AND FOR SHARE OF PROFIT NO TDS IS ATTRAC TED. THE ASSESSING OFFICER HAS NOT BROUGHT SUFFICIENT MA TERIAL TO MAKE THIS DISALLOWANCE. THEREFORE GROUND NO.4 DESERVES TO BE ALLOWED. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS RIGHT IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF ROYALTY AMOUNTI NG TO RS.31 42 857/- PAID TO M/S. BHANSALI PRODUCTIONS . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN OBSERVING IN PARA 5.3 THAT AMENDMENT TO SECTION 40(A)(I) HAS COME INT O EFFECT W.E.F. 1.4.2006 WHEREAS SAID AMENDMENT IS EFFECTIVE W.E.F. 1.4.2005. CIT(A) CONSEQUENTLY ALS O ERRED IN GRANTING RELIEF TO THE ASSESSEE. ITA NO.652/M/09 A.Y:05-06 4 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSE SSING OFFICER RESTORED. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS N OT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER BE RE STORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER AND THE LD. CIT(A) PLACED RELIANCE ON THE FI LM FINANCING AGREEMENT R.T.W. CONFIRMATION AND LETTER OF ARRANGE MENT APPEARING AT PAGE 1 TO 5 OF ASSESSEE'S PAPER BOOK TO SHOW THAT IT WAS ACTUALLY 50% OF THE SHARE OF PROFIT AGAINST THE INCOME CREDITED TO THE P&L ACCOUNT AND HENCE THE PROVISIONS OF TDS ARE NOT ATTRACTE D. HE FURTHER SUBMITS THAT IN ANY CASE THE TDS ON ROYALTY HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT 2006 W.R.E.F.1 -4-2006. HE THEREFORE SUBMITS THAT THE ORDER PASSED BY THE LD. CIT (A) BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE PAYMENT TO M/S. BHAN SALI PRODUCTIONS WAS MADE BY THE ASSESSEE AS PER FILM FINANCIAL AGREEMENT SUPPORTED BY CONFIRMATION. IT IS SETTLED LAW THAT MAKING OF ITA NO.652/M/09 A.Y:05-06 5 AN ENTRY OR ABSENCE OF AN ENTRY DOES NOT DETERMINE THE ALLOWABILITY OR OTHERWISE OF THE ITEM OF EXPENDITURE AND THE SAME CAN NOT BE CONSIDERED TO BE A FACTOR ADVERSE IF THE EXPENDITURE I S OTHERWISE OF ALLOWABLE NATURE. THIS BEING SO AND KEEPING IN VIEW THAT THE PROVISION OF SECTION 40(A)(IA) FOR THE TDS ON ROYALTY HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT 2006 W.R.E.F.1 .4.2006 AND THE CASE OF THE ASSESSEE IS FOR THE ASSESSMENT YEAR 2005-06 THEREFORE WE ARE OF THE VIEW THAT THE ASSESSING OFFICE R WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF RS.31 42 857/- U/S.40(A)(I) OF THE ACT DEALING WITH PAYMENT OF ROYALTY ETC. PAYABLE OUTSIDE INDIA OR IN INDIA TO A NON-RESIDENT NOT BEING A COMPANY OR TO A FOREIGN COMPANY AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE F INDING OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE A SSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJE CTED. 7. IN THE RESULT THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.7.2010. SD/- SD/- (PRAMOD KUMAR) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI DATED: 16.7.2010. JV. ITA NO.652/M/09 A.Y:05-06 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 8.7.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 9.7.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 16.7.2010 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 20.7.2010 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER