2024 (1) TMI 153 - AT - Income Tax

TV production company wins partial relief on expense disallowances and unexplained asset additions

The ITAT Mumbai partly allowed the assessee's appeal regarding disallowances on TV serial production costs and other expenses. The tribunal confirmed the ... Disallowance on cost of production and other expenses with respect to the production of TV serial - HELD THAT:- The assessee in its computation of total income already disallowed such sum. In the additional evidences filed before the CIT- A, the assessee itself submitted that even if the addition/disallowance is required to be confirmed, the same should be restricted to some lower percentage. CIT-A has granted reduction of the already disallowed sum out of the total expenditure by the assessee and restricted the disallowance to the extent of 2% of such sum. This is because of the reason that during the assessment proceedings, in the remand proceedings as well as before us, no evidences were placed. Accordingly, no merit in ground No.1 of the appeal. Accordingly, the disallowance made by the learned CIT – A is confirmed. Disallowance of interest expenditure/finance cost - After careful consideration and hearing the parties, we find that a sum of Rs. 3,24,000/- disallowance confirmed by the learned CIT – A is also pertaining to the loan, which is accepted by the lower authorities as genuine. Therefore, the disallowance to the extent of Rs. 3,24,000/- deserves to be deleted. With respect to the balance interest of Rs. 64,661/, on which assessee itself has disallowed the sum for non-deduction of tax at source, therefore, the said disallowance if retained would result into double disallowance. Therefore, the same is also deleted. With respect to the brokerage expenses there is no adverse view of the learned AO. Accordingly, we direct the learned Assessing Officer to delete the disallowance of the same. Accordingly, the total disallowance retained of Rs. 6,15,600/-, the assessee deserves a further relief of Rs. 4,51,161/-. Accordingly, the disallowance confirmed by the learned CIT -A to that extent is deleted. In the result, the ground No.2 of the appeal is partly allowed. Unexplained addition of assets - AO noted that the assessee has claimed that depreciation on account of addition on plant and machinery and further sum towards furniture and fixture. This was the addition made to the block of assets during the year. Naturally, the assessee claimed depreciation thereon during the year against the income offered - HELD THAT:- Assessee has claimed depreciation as a deduction/allowance and not the amount of fixed assets purchased. Therefore, what could be disallowed in the hands of the assessee is only the depreciation claimed by the assessee. It is not the claim of the Revenue that the amount of purchase of the fixed assets is not recorded in the books of account of the assessee. Therefore, addition to that extent in spite of the fact that assessee failed to produce the bills, etc., what could have been disallowed is only the depreciation claimed by the assessee. Therefore, the lower authorities are not justified in making the disallowance/addition of the cost of fixed assets purchased by the assessee. We direct AO to restrict the disallowance to the extent of depreciation claimed during the year on these two assets. Appeal of the assessee is partly allowed. Issues Involved:1. Disallowance of cost of production and other expenses.2. Disallowance of finance cost.3. Addition on account of alleged unexplained addition of assets.Summary:Issue 1: Disallowance of Cost of Production and Other ExpensesThe assessee, a production house, was aggrieved by the disallowance of Rs. 3,82,245/- out of the total expenditure on the production of television serials and other expenses. The Assessing Officer (AO) had disallowed 10% of the expenditure due to the lack of documentary evidence. The CIT(A) reduced this disallowance to 2% after considering the remand report and submissions. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had already disallowed certain expenses on its own and failed to provide evidence during the proceedings.Issue 2: Disallowance of Finance CostThe AO initially disallowed the entire finance cost of Rs. 17,59,161/- due to the absence of supporting details. The CIT(A) restricted the disallowance to Rs. 6,15,600/- after accepting the genuineness of certain loans during the remand proceedings. The Tribunal further reduced the disallowance by Rs. 4,51,161/-, acknowledging that certain interest expenditures were verified and accepted by the AO. The final disallowance was thus limited to Rs. 1,64,439/-.Issue 3: Addition on Account of Alleged Unexplained Addition of AssetsThe AO added Rs. 10,70,392/- to the total income, representing the cost of plant, machinery, and furniture added during the year, as the assessee failed to provide supporting documents. The CIT(A) confirmed this addition. The Tribunal, however, directed the AO to restrict the disallowance to the depreciation claimed on these assets, amounting to Rs. 65,520/-, since the actual purchase cost was recorded in the books of account.Conclusion:The appeal was partly allowed. The Tribunal upheld the disallowance of Rs. 3,82,245/- for production costs, reduced the finance cost disallowance to Rs. 1,64,439/-, and limited the addition for unexplained assets to the depreciation claimed, amounting to Rs. 65,520/-.