M/s. MEGA BOLLYWOOD P. LTD., MUMBAI v. DCIT CENT. CIR. - 24, MUMBAI

ITA 726/MUM/2007 | 2003-2004
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 72619914 RSA 2007
Assessee PAN AAACY0507D
Bench Mumbai
Appeal Number ITA 726/MUM/2007
Duration Of Justice 4 year(s) 1 month(s) 2 day(s)
Appellant M/s. MEGA BOLLYWOOD P. LTD., MUMBAI
Respondent DCIT CENT. CIR. - 24, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-02-2011
Date Of Final Hearing 14-07-2010
Next Hearing Date 14-07-2010
Assessment Year 2003-2004
Appeal Filed On 22-01-2007
Judgment Text
1 ITA NO. 726/MUM/2007 ASSTT.YEAR : 2003-2004. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI N.V. VASUDEVAL JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER I.T.A. NO. 726/MUM/2007. ASSESSMENT YEAR : 2003-04 MEGA BOLLYWOOD PVT. LTD. DY. COMMISSIONER OF INCOME-TAX 5-C SWAPNALOK VS. CENTRAL CIRCLE-24 MUMBAI. L.JAGMOHANDAS MARG MUMBAI 400 006. PAN : AAACY0507D APPELLANT. RESPONDENT. APPELLANT BY : SHRI VIJAY KUMAR S. BIYANI. RESPONDENT BY : SHRI HARI GOVIND SINGH. O R D E R PER J. SUDHAKAR REDDY A.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-IV MUMBAI DATED 03-11-2006. 2. THE ASSESSEE IS IN THE BUSINESS OF FILM PRODUCTI ON AND FILM FINANCE AND ACTS AS WORLD RIGHT CONTROLLER OF FILMS PRODUCED BY OTH ERS. THE AO DISALLOWED THE CLAIM OF EXPENDITURE OF RS.75 35 320/- INCURRED BY THE ASSESSEE IN DEFENDING SHRI BHARAT SHAH AGAINST CRIMINAL PROCEEDINGS. AT PARA 4 THE AO HELD AS FOLLOWS: EXPENDITURE OF RS.75 35 310/- INCURRED ON DEFENDIN G SHRI BHARAT SHAH AGAINST CRIMINAL PROCEEDINGS : THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE ASS ESSMENT ORDER FOR THE AY 2002-03 WHEREIN THE EXPENDITURE FOR DEFENDING PA RTNERS IN CRIMINAL PROCEEDINGS IS DISALLOWED. THE CIRCUMSTANCES ARE ID ENTICAL ON THIS YEAR ALSO. 2 ITA NO. 726/MUM/2007 ASSTT.YEAR : 2003-2004. THE ASSESSEES ARGUMENTS ARE ALSO LIKE LAST YEAR. S INCE THE ISSUE HAS BEEN DECIDED IN AY 2002-03 AND THERE IS NO CHANGE IN THE CIRCUMSTANCES THE AMOUNT OF RS.75 35 310/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L. THE FIRST APPELLATE AUTHORITY UPHELD THE DISALLOWING BY HOLDING AS FOLLOWS : 10. IN VIEW OF THE FACTS OF THE CASE AS DISCUSSE D ABOVE THE CLAIM OF THE APPELLANT FOR ALLOWING OF THE EXPENDITURE OF RS.753 5320/- AS A BUSINESS EXPENDITURE FAILS ON THE MOST BASIC GROUN D IE. IT HAS NOT BEEN EXPENDED WHOLLY EXCLUSIVELY AND NECESSARILY FOR TH E PURPOSE OF THE BUSINESS OF THE APPELLANT. IT IS IN FACT SHOCKING T O NOTE THAT THE APPELLANT HAS BLATANTLY SOUGHT TO MAKE A CASE SEEK ING DEDUCTION OF AN EXPENDITURE WHICH IS CLEARLY NOT A PERMISSIBLE DED UCTION UNDER THE FRAMEWORK OF THE INCOME TAX ACT 1961. I FIND IMMEN SE MERIT IN THE CONCLUSION OF THE AO THAT THE EXPENDITURE WAS INCUR RED BY THE APPELLANT ON DEFENDING THE CRIMINAL CHARGES LEVIED AGAINST SHRI BHARAT SHAH AND OTHERS IN THEIR INDIVIDUAL CAPACITY. THE S AID EXPENDITURE INCURRED WAS ALSO NOT IN RESPECT OF A TRANSACTION W HICH AROSE OUT OF AND WAS INCIDENTAL TO THE APPELLANTS OWN BUSINESS. THE CRIMINAL CHARGES LEVELLD IN THE IMPUGNED MCOCA CASE WERE NO T AGAINST THE APPELLANT BUT WERE AGAINST CERTAIN INDIVIDUALS. TH ESE CHARGES HAVE CATEGORICALLY ARISEN INDEPENDENT OF THE BUSINESS AC TIVITY OF THE APPELLANT AND ARE NOT INCIDENTAL TO ANY TRANSACTION ENTERED INTO BY THE APPELLANT. THE AO IS RIGHT IN STATING THAT THE CRIM INAL CHARGES DEFENDED ARE ON CERTAIN INDIVIDUALS WITH WHOM THE APPELLANT HAS A BUSINESS TRANSACTION BUT THAT CANNOT JUSTIFY THE A LLOWABILITY OF THE EXPENDITURE INCURRED. 11. THE APPELLANT HAS RELIED ON VARIOUS CASE LAWS. UNFORTUNATELY NONE OF THESE CASE LAWS COME TO ANY HELP TO THE APPELLANT B ECAUSE IN NONE OF THE JUDICIAL PRONOUNCEMENTS ANY PROPOSITION HAS BEE N LAID DOWN THAT A DEDUCTION U/S 37(1) OF THE I.T. ACT IS ALLOWABLE F OR DEFENDING A CASE OF SOME OTHER INDIVIDUAL WHO HAS BEEN ACCUSED IN CR IMINAL CONSPIRACY. 12. IN VIEW OF THE FOREGOING I UPHOLD THE DECISION OF THE AO AND HOLD THAT THE SUM OF RS.755535320/- SPENT BY THE APPELL ANT IN DEFENDING BHARAT SHAH AND OTHERS AGAINST CRIMINAL CHARGES UN DER THE MCOC 3 ITA NO. 726/MUM/2007 ASSTT.YEAR : 2003-2004. ACT FOR SERIOUS CRIMINAL OFFENCES IS NOT AN ALLOWA BLE BUSINESS EXPENDITURE. AGGRIEVED THE ASSESSEE IS IN APPEAL. 3. WE HAVE HEARD MR. VIJAY KUMAR S. BIYANI LEARNED COUNSEL FOR THE ASSESSEE AND MR. HARI GOVIND SINGH THE LEARNED DR. 4. THE LEARNED COUNSEL FOR THE ASSESSEE WAS FAIR EN OUGH TO SUBMIT THAT THE C- BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE EARLIER ASSESSMENT YEAR 2002-03 IN ITA NO. 2506/MUM/2006 ORDER DATED 15 TH FEB. 2010 HAS HELD IN FAVOUR OF THE REVENUE ON THE VERY SAME ISSUE. NEVER THELESS HE SUBMITTED THAT AS THE AO AND THE CIT(APPEALS) HAVE NOT EXAMINED THE D ETAILS OF THE EXPENDITURE THE ISSUE MAY BE SET ASIDE FOR FRESH ADJUDICATION. 5. THE LEARNED DR OPPOSED THESE CONTENTIONS AND SUB MITTED THAT THE CASE HAS BEEN DISCUSSED IN DETAIL BEFORE THE CIT(APPEALS). 6. AT PARA 8 THE CIT(APPEALS) HAS CLEARLY HELD AS FOLLOWS : 8. IT IS AN UNDISPUTED FACT THAT :- A. THE APPELLANT WAS NOT AN ACCUSED UNDER THE SAID SUI T AND THE EXPENDITURE OF RS.7535320/- WAS THEREFORE NOT INCUR RED IN ITS DEFENCE. B. THE SERIOUS CRIMINAL OFFENCE WAS COMMITTED BY MR. B HARAT SHAH IN HIS INDIVIDUAL CAPACITY AND THE APPELLANT HAS SPENT MONEY IN HIS DEFENCE AND HAS THUS INCURRED THE EXPENDITURE OF R S.7535320/-. C. WHILE NOT RELEVANT TO THE CASE HERE IT IS WORTH NO TING THAT MR. BHARAT SHAH WAS FOUND GUILTY UNDER THE IPC AND WAS SENTENCED TO ONE YEAR RIGOROUS IMPRISONMENT TOO. ALL THE CRIMINA L CHARGES ARE AGAINST MR. BHARAT SHAH AND IT IS OUTLANDISH TO EVE N THINK THAT THE SUM OF RS.7535320/- SPENT BY THE APPELLANT WAS FOR ITS OWN BUSINESS PURPOSE. THE CRIME WAS COMMITTED BY AND TH E CRIMINAL CHARGES WERE LEVIED AGAINST MR. BHARAT SHAH AND THE AMOUNT OF 4 ITA NO. 726/MUM/2007 ASSTT.YEAR : 2003-2004. RS.75.35 LACS WAS SPENT IN DEFENDING THE ACCUSED IN THE CASE WHICH CERTAINLY DID NOT INCLUDE THE APPELLANT AS I S CLEAR FROM THE IMPUGNED ORDER. IN VIEW OF THE SPECIFIC FINDING AND IN VIEW OF THE FACT THAT THE ASSESSEE HAS NOT BROUGHT ANY THING ON RECORD TO POINT OUT THAT THIS AMOUNT OF RS.75 35 320/- CONSISTS OF PAYMENTS MADE FOR CERTAIN OTHER PURPOSE S THAN DEFENDING MR. BHARAT SHAH IN CRIMINAL CHARGES WE FIND NO MERIT IN THE S UBMISSION OF THE ASSESSEE THAT THE MATTER SHOULD BE SET ASIDE FOR FRESH ADJUDICATI ON. WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR AND UPHOLD THE ORDER OF THE FIRST A PPELLATE AUTHORITY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY 2011. SD/- SD/- (N.V. VASUDEVAN) (J. SUDH AKAR REDDY) JUDICIAL MEMBER. A CCOUNTANT MEMBER MUMBAI DATED: 25 TH FEBRUARY 2011. WAKODE 5 ITA NO. 726/MUM/2007 ASSTT.YEAR : 2003-2004. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR B-BENCH (TRUE COPY) BY ORDER ASSTT. REGISTRAR ITAT MUMBAI.