TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 54
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....Narmada Films Pvt Ltd. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance in respect of advance received from Tips Industries of Rs. 25,00,000/-. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance in respect of depreciation claimed of Rs. 2,12,184/-. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of Ld AO in treating 3 properties as Deemed to be let out. 5. That the orders of both Ld Commissioner of Income Tax (Appeals) and Ld Assessing Officer are bad in law and on facts." 3. The brief facts of the case are that the assessee carries on the business activity of acting and direction of feature film's. During the assessment proceedings carried on by the Revenue u/s 143(3) read with Section 143(2) of the Act, the learned assessing officer(hereinafter called "the AO") observed that assessee has shown an amount of Rs. 4,38,395/- as amount written off under the head "Direct and Indirect Expenses". The assessee was asked to explain as to why the claim of bad debts which is in the nature of investment shoul....
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....amount i.e. Rs. 4,38,385/- to the total income of the assessee vide assessment orders dated 07-12-2010 passed by the AO u/s 143(3) of the Act. 4. Aggrieved by the assessment orders dated 07-12-2010 passed by the AO u/s 143(3) of the Act, the assessee preferred an appeal before the CIT(A). 5. Before the CIT(A) , the assessee submitted that assessee has made an arrangements with the PNF in September 2001 for acquiring 25% shares in distribution of feature film 'Nayak' for which an advance of Rs. 10 lakhs was given to the PNF. The total cost of the film was Rs. 36,53,525/- whereas the business done by the film was Rs. 14,07,090/-. Thus a loss of Rs. 22,26,020/- was incurred in which assessee's share was at Rs. 5,61,605/-. Hence , after providing for the loss suffered by the assessee , the amount of Rs. 4,38,395/- was receivable from the PNF . Since despite several reminders to the PNF, the amount was not received from the PNF and which was written off by the assessee as bad debts in the impugned assessment year under appeal. However, inadvertently, the advance given was shown in balance sheet as 'Investment' instead of 'loans and advances'. The assessee submitted before the CIT(A) t....
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.... with the PNF dated 4th September, 2001 which is placed at paper book page 83 & 84.The ld. Counsel also drew our attention to the various letters and reminders sent by the assessee to the said PNF for refund of the amount Rs. 4,38,395/- which is placed at paper book page nos. 85 to 89. The ld. Counsel also drew our attention to the balance sheet for the years 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08, copy of which are placed in the file to substantiate that the advance of Rs. 10 lacs was shown in the books of account albeit under the head 'Investment'. The amount of Rs. 5,61,605/- was claimed as loss during the assessment year 2002-03 and balance amount of Rs. 4,38,395/- was carried forward as recoverable from the PNF in the books of account for the assessment year 2002-03, 2003-04, 2004-05, 2005-06 and 2006-07 and finally written off in the assessment year 2008-09. The ld. Counsel submitted that advance given to PNF is an irrecoverable advance which had been given in the ordinary course of business of buying share of distribution rights of a movie and it should be allowed as deduction. The amount advanced to M/s PNF was duly declared and disclosed to the Revenue in ....
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....) of the Act and the said amount of Rs. 4,38,395/- written off by the assessee as irrevocable as bad debt is allowable as revenue expenditure. Hence, The addition of Rs. 4,38,395/- made by the A.O. and as sustained by the CIT(A) is hereby ordered to be deleted. We order accordingly. 10. Coming to ground No. 2, from the perusal of the balance sheet of the assessee, the A.O. observed that the assessee has received an advance of Rs. 25 lacs which is reflected in the balance sheet under the head "Current Liabilities and Provisions' which is in the nature of advance received from Tips Industries Limited. The assessee was asked to explain as to why advance received from Tips Industries Limited should not be treated as income as assessee is following cash method of accounting. The assessee explained that a sum of Rs. 25 lacs was received during the year from Tips Industries Ltd. for accepting the assignment to work as Director for their two forthcoming films. As per the letter from the company Tips Industries, it was specifically mentioned as advance on signing of the letter and accepting the assignment and not towards remuneration and the said advance is to be adjusted against the remun....
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....ve of fact when and how the services were to be performed or goods delivered. Since the assessee has received amount on account of signing of the contract agreement for various agreements and works to be performed, therefore the amount received is to be recognized as income of the assessee and accordingly, the CIT(A) upheld findings of the AO vide orders dated 18-06-2012. 13. Aggrieved by the orders dated 18-06-2012 of the CIT(A), the assessee is in appeal before the Tribunal. 14. The ld. Counsel for the assessee submitted that the advance was received from Tips Industries Ltd of Rs. 25 lacs by the assessee. The ld. Counsel drew our attention to page No. 90 & 91 of paper book filed with the Tribunal, which is placed on record, whereby there is an mutual understanding dated 05-02-2008 entered into by the assessee with the Tips Industries Ltd and based on the said mutual understanding an amount of Rs. 25 lacs was received by the assessee wherein it was clearly mentioned that the amount of Rs. 25 lacs paid to the assessee is an advance on signing of this mutual understanding dated 05-02-2008 and this advance is not towards remuneration but only for accepting the directorial assignme....
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....so agreed that in the event of non starting of the first film as per agreed terms, the said amount of Rs. 25,00,000/- will be refunded by the assessee to Tips Industries Limited. It is an undisputed fact that the assesssee did not start the film as per mutual understanding dated 05-02- 2008 . It is stated that Tips Industries Limited is demanding their money back due to non-starting of the film by the assessee. In the instant case, the amount of Rs. 25,00,000/- has been held by the assessee on behalf of Tips Industries Ltd. and is not being held by the assessee in his own right as the assessee can be deemed to hold the said amount in his own right on commencement of the film. No income is being generated or earned even under the cash system of accounting followed by the assessee as in the instant case the film has not commenced as per agreed terms and the amount has become refundable to Tips Industries Limited which is stated to be asking for refund of their advance. In our considered view, the addition made by the A.O. is not sustainable in law because the amount is being still held by the assessee on behalf of the Tips Industries Ltd and not on his own right as per the agreed ter....
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....or residence, this property is also used for creative activities, business dealings, negotiating projects with producers/production houses etc. in his capacity as an actor, director. The assets installed therein are related and an aid to his professional activities and hence Depreciation on such assets is claimed. The A.O. rejected the contention of the assessee by holding as under:- "a) Office at Saidwar:- If the office at Saidwar was given on rent, then no depreciation claimed by the assessee as it is not used for the purpose of his business but for the purpose of business to whom it is let out. Hence, Rs. 90,378/- claimed as depreciation on various block of assets is hereby denied and added back to the total income of the assessee. b) Evershine Greens:- The assessee failed to produce proof as to whether the electricity is being charged as commercial rates if the property is used for commercial purpose as claimed by the assessee. Also it is ironical that no depreciation is being claimed on the flat as such but depreciation is being claimed on the block of furniture and fixture and computers. c) TRANQUIL TREAT:- The assessee is an actor and a director who at the most req....
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....gular office is done at a calm and serene place. With regard to the Tranquil Treat, it was submitted that this property was being used as godown and storage place for various material, costume, and thus being used for business and furniture and fixtures also being used for business purpose hence, depreciation on the same should be allowed. With respect to the Raj Classique property, it was stated that while this property is being used for residence, a part of is also used for creative activities, business dealing, negotiating projects, hence depreciation should be allowed on the part of this property. The CIT(A) after considering the facts and perusing the material on record held that Saidwar property was given on rent to Chitrayug Productions Pvt. Ltd. in which the assessee is Director and received rent from the same. The CIT(A) held vide orders dated 18-06-2012 that it is an established fact that the property in question was rent out property on which rental income has been shown, therefore, the A.O. was justified in making disallowance of depreciation on this property. With respect to Evershine Green property, it was found by the CIT(A) that the assessee has not able to prod....
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....the ld. D.R. supported the orders of authorities below. 23. We have considered the rival contention and also perused the material available on record and also the judicial pronouncements cited by the rival parties. We have observed that the assessee is the owner of four premises namely 'Saidwar', 'Evershine Greens', 'Tranquil Treat' and 'Raj Classique' which was stated by the assessee to have been utilized for the purpose of his business.The assessee is in the business of acting , direction and film production. The assessee has claimed that the assessee has utilized these premises for business for which the assessee has claimed depreciation for the furniture and fixture and computers installed at the above-stated four premises. The authorities below have rejected the contentions of the assessee and claim of the assessee for grant of depreciation on furniture and fixtures and computers installed at these premises was not accepted by the Revenue on the allegation that business user of these afore-stated four premises by the assessee is not proved. In our considered view and in the interest of justice, the matter need to be set aside and restored to the file of the AO for de-novo det....
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....mself for his creative activities as an Actor, Director etc. for conducting story sessions, photo shoots, rehearsals etc. (c) TRANQUIL TREAT :-This property is also being used as godown and storage space for various materials, costumes, scripts other film and theatre stage related material. (d) RAJ CLASSIQUE :- Though used for residence, this property is also used for creative activities, business dealings, negotiating projects with producers/production houses etc. in his capacity as an actor, director. The Revenue has considered the other properties as deemed let out properties other than Raj Classique property which is treated as self occupied property, and the gross ALV of the three house property other than Raj Classique were taken at 10% of the respective book value of property as deemed let out properties while working of income of these house properties under the head 'Income from house property' which was calculated as under:- Saidwar - 32,41,630 Evershine Greens - 44,59,690 Tranquil Treat - 9,00,000 Total - 86,01,320 10% of the book value of the property 8,60,132 Less: 30% Standard Deduction 2,58,040 6,02,092 Hence, Rs. 6,02,092/- was trea....
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....he rival submission and also perused the material available on record. The assessee's claim is that all the three properties were being used for the personal use of profession hence it should not be treated as deemed let out properties. We find that the assessee also claimed depreciation on furniture and fixture and computers installed at these properties whereby we have set aside the matter of allowability of depreciation on furniture and fixtures and on computers to the file of A.O. and directed the assessee to produce cogent evidence/material to substantiate his claim of business user of the afore-stated properties and the A.O. shall examine the same for deciding the issue of claim of depreciation and we apply the same principle in this issue also, hence, we set aside this issue to the file of A.O. for de-novo determination of issue after considering the cogent material/evidences brought on record by the assessee in his defense in denovo proceedings . The A.O. is directed to admit evidences furnished by the assessee in de-novo proceedings in his defense and the AO should consider the necessary evidences submitted by the assessee before deciding the matter on merit. The A.O. is a....