TaxTMI 
TaxTMI 
2012 (4) TMI 269
X X X X Extracts X X X X
X X X X Extracts X X X X
....al the section 194C is not attracted. As such no disallowance would be called for u/s. 40(a)(ia) of the Income-tax Act, 1961. The Appellant prays that the entire arbitrary disallowance of Rs. 3,67,28,299/- be deleted." 3. The assessee is an individual. He is engaged in the business of production of cinematographic films as proprietor of M/S. Neha Arts. One Mr. Mani Shankar, Prop. Bhairav Films, is a director of cinematographic films in Hindi. Bhairav Films approached the assessee with a proposal to produce a film in Hindi under the title "TANGO CHARLIE", (hereinafter referred to as "the film"). The assessee agreed to the proposal. An agreement dated 29.11.2002 was entered into between the parties reducing the terms of the agreement between the parties to writing. Bhairav Films agreed to bear all the remunerations to leading artists, wages and allowances of personal staff of leading artists, interest on finance for the film, publicity expenses, music expenses i.e., remuneration payable to music director, lyricists, musicians, background score etc. Bhairav Films also agreed to deliver the first print of the film at his cost. The assessee was to pay Bhairav films a sum of Rs. 4.50 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and gains of business or profession",-- (a) in the case of any assessee- (i) (ia) any interest, commission or brokerage, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 : Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation.-For the purposes of this sub-clause,- (i) "commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H ; (ii) "fees for te....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rms "fees for technical services" as laid down in Expln.-2 to clause (vii) of Sec. 9(1) of the Act, which reads as follows: "Explanation 2.--For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries"." The CIT(A), therefore, held that there was obligation on the part of the assessee to deduct tax at source and on such failure the rigours of Sec. 40(a)(ia) of the Act would operate and the AO was justified in disallowing the deduction. 6. Aggrieved by the order of the CIT(A), the assessee has raised ground No. 1 before the Tribunal. The learned D.R. relied on the order of the CIT(A). According to him, the services rendered by Bhairav Films were managerial in nature as Mr. Mani Shankar had managed all the activities relating to production of films. The learned coun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 194J, it was 5 per cent. An order was made by the Assistant Commissioner of Income-tax ("the ACIT") under section 201/201(1A) of the Act holding that the assessee is liable to be treated as an assessee in default in respect of the short deduction including interest for the relevant financial years. The Tribunal held that the applicable provisions were Sec. 194-C of the Act and not Sec. 194-J of the Act. On further appeal by the Revenue, the Hon'ble Delhi High Court noticed that by the Finance Act, 1995, with effect from July 1, 1995, Explanation III was inserted in section 194C which read as under : "Explanation III.-For the purposes of this section, the expression 'work' shall also include- (a) advertising ; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting ; (c) carriage of goods and passengers by any mode of transport other than by railways ; (d) catering." The Hon'ble Court, therefore, held that in terms of clause (b) of Explanation III to section 194C, payment made towards a contract concerning "broadcasting and telecasting include pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e with this submission. We observe that Explanation III, which was introduced simultaneously with section 194J, is very specific in its application to not only broadcasting and telecasting but also include "production of programmes for such broadcasting and telecasting". If, on the same date, two provisions are introduced in the Act, one specific to the activity sought to be taxed and the other in more general terms, resort must be had to the specific provision which manifests the intention of the Legislature. It is not, therefore, possible to accept the contention of the Revenue that programmes produced for television, including "commissioned programmes", will fall outside the realm of section 194C, Explanation III of the Act. We find no infirmity in the view taken by the Income-tax Appellate Tribunal which we hereby affirm." We are of the view that the ratio of the aforesaid decision can be extended to production of films. Fundamentally, there is no difference between production of film for broadcasting and telecasting except that cinemotograph films are exhibited in theatres for viewing by the public. Sec. 194-C (1) uses the following expression : "Any person responsible f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case in arbitrarily confirming addition to the extent of Rs. 20,39,066/- u/s. 41(1) of the Income-tax Act, 1961. He failed to appreciate the Appellant's contention that the ld. Assessing Officer did not bring on record any materials whatsoever to establish that the mandatory conditions and the pre-requisites for invoking the charging provisions of section 41(1) of the Act have been fulfilled in the year under appeal. The ld. CIT(A) ought to have held that the mandatory conditions prescribed u/s. 41(1) of the Act having been not fulfilled and keeping in view the plethora of judicial proceedings, no addition is called for u/s. 41(1) of the Act. The Appellant prays that the entire addition of Rs. 20,39,066/- be deleted." 9. The AO noticed that there were large number of outstanding liabilities and other credits appearing in the balance-sheet as on 31-3-2005. These outstanding liabilities existed even as on 1-4-2004. The AO called upon the assessee to show cause as to why these liabilities were outstanding since 1-4-2004. The assessee submitted that in the absence of production of films, the liabilities are never treated as no longer payable. The assessee also submitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e did not file confirmation from the parties and that the explanation given by the assessee was very general in nature. He, therefore, confirmed the disallowance made by the AO to the above extent. 12. Aggrieved by the order of CIT(A), the assessee has raised ground No. 2 before the Tribunal. 13. We have heard the submissions of the ld. counsel for the assessee who reiterated the stand as was taken before the CIT(A). The ld. DR relied on the order of CIT(A). 14. We have considered the rival submissions. Admittedly, the amounts which were considered as income u/s. 41(1) were balances appearing in the balance-sheet as on 1-4-2004. As on 31-3-2005, the liabilities continued to be recognized by the assessee. The genuineness of these liabilities cannot be subject matter of investigation in the present assessment year because they were not liabilities incurred during the previous year. The case of the Revenue is based on the provisions of sec. 41(1) of the Act. Those provisions reads as follows : "41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties, section 41(1) is not applicable. Even in respect of time-barred debts, Courts have taken the view that addition cannot be made u/s. 41(1) of the Act. It has also been held that sec. 41(1) cannot be applied merely on imagination. We are of the view that in the present case there is no material on record to show that there was cessation of liability or remission of liabilities and that the assessee derived benefit by such remission or cessation of liabilities. In fact, the facts and record go to show that the liabilities were only one year old. In these circumstances, we are of the view that the addition sustained by the CIT(A) deserves to be deleted. Accordingly, ground no. 2 raised by the assessee is allowed. 16. Ground no. 3 raised by the assessee reads as follows : "3. The learned CIT(A) seriously erred in law and on the facts and in the circumstances of the case in arbitrarily rejecting the Additional Ground raise d by the Appellant praying for allowance of expenditure in respect of TDS paid by the appellant before the due date for filing of the Return. The said claim for expenditure was necessitated on account of the retrospective amendment in law amending section 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee as made in the additional ground was correct. The CIT(A), however, was of the view that in view of the decision of the Hon'ble Supreme Court in the case of Goetz (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1 (SC), it was not possible to entertain any claim for deduction other than by filing a revised return of income. The CIT(A), therefore, refused to give benefit to the assessee because of absence of revised return of income. The CIT(A) also held that as per the decision of Hon'ble Supreme Court (supra), only powers of the Tribunal to entertain such a claim have been referred to but not those of CIT(A). For the above reasons, the CIT(A) refused to entertain the additional ground raised by the assessee before the CIT(A). 19. Aggrieved by the order of CIT(A), the assessee has raised ground No. 3 before the Tribunal. 20. We have heard the rival submissions. The ld. DR relied on the order of the CIT(A). The ld. counsel for the assessee submitted that the powers of the Tribunal to entertain a new claim are not in any way restricted by the decision of the Hon'ble Supreme Court in the case of Geotz (India) Ltd. (supra). In this regard, the ld. counsel a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion feature film is computed by allowing the cost of production of a feature film certified for release by the Board of Film Censor in the previous year in which the film is released. If the film is released 90 days before the end of the previous year, then the cost of production of the film will be allowed by setting off the cost of production to the extent of the amount realized on exhibiting the film and the remaining sum of cost of production, if any, will be allowed as a deduction in the following previous year. 25. As we have already seen, M/s. Karma Entertainment was dissolved and the assessee took over all its assets and liabilities. During the previous year relevant to assessment year 2004-05, in the assessment of M/s. Karma Entertainment, un-recouped cost of production of film Rudrakash was determined at Rs. 2,93,75,793/-. Since the assessee took over M/s. Karma Entertainment, the assessee treated the un-recouped cost of production as above as an expense in its profit & loss account and also showed realization of Rs. 1,39,709/-on exhibiting the film. This way the assessee arrived at a net loss of Rs. 3,01,53,795/-. The same is as follows : "Particulars ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and became proprietary concern in 2005-06. The film Rudraksh was produced by M/s. Karma Entertainment in Asst. Yr. 2004-05 and released in February 2004. In the assessment of the firm for AY 04-05, the A.O. has also generally agreed with the accounts of M/s. Karma Entertainment. The AO has found no faults in the accounts of M/s. Karma Entertainment in Asst. Yr. 2004-05 and has accepted the loss declared and also the un-recouped cost of production of the film rudraksh. The AO however wanted to disallow the claim for deduction of un-recouped cost of film rudraksh in the hand of the Assessee and for this purpose reopened the assessment of M/S. Karma Entertainment for AY 04-05. Based on the reopening of assessment of Karma Entertainment, the AO wants to disallow un-recouped costs in the hands of the Assessee which is not possible. The un-recouped cost of production of the firm already accepted in the hands of the firm cannot be disputed in the hands of the Assessee. A copy of the order in the case of M/s. Karma Entertainment u/s. 147 r.w.s. 143(3) dated 18/12/2008 was also filed before CIT(A). 28. The CIT(A) after considering the submissions and the materials on record found that it....