2010 (2) TMI 745 - AT - Income Tax

Medical expenditure - Revenue or personal expenditure - According to the Assessing Officer hospitalisation of the assessee has no way affected the shooting schedule. The medical report also establishes that the assessee suffered from cancer which is not a sudden development. Moreover, the entire shooting schedule in USA was insured and the assessee had paid the insurance premium of Rs.11,81,071 for the film which has been included in the cost of production. Therefore, this insurance should cover the assessee also as producer. Rejecting the various judicial decisions cited before him, the Assessing Officer held that the medical expenses of Rs.31,73,816 is not wholly and exclusively incurred for the purpose of business. He accordingly disallowed the above amount. Held that - insurance company has clarified that no policy cover for life or health is available to Shri Yash Johar in India or abroad since he has crossed the age of 70 years. We find the issue stands covered in favour of the assessee by the decision of the jurisdictional High Court in the case of Mehboob Productions Pvt. Ltd. (1974 -TMI - 39159 - BOMBAY High Court) which has been relied upon by the CIT(A). - Deduction allowed - decided in favor of assessee. Disallowance of expenses on Ad hoc basis - Assessing Officer disallowed an amount of Rs.5 lakhs on ad-hoc basis on the ground that the assessee has incurred huge expenses under various heads which includes cash expenses, some of which are supported by self made vouchers only which are not fully verifiable. Further there are huge cash expenses incurred during the foreign shooting. - held that - Since the accounts of the assessee are audited and no specific instance has been brought on record by the Assessing Officer as to which is the expenditure which according to him is not fully supported with vouchers, therefore, we do not find any infirmity in the order of the CIT(A) deleting the ad hoc disallowance made on the basis of presumptions and guesswork. - Decided in favor of assessee.

Summary

Issues involved:
1. Disallowance of medical expenditure under section 37 of the Income-tax Act, 1961.
2. Disallowance of expenditure during foreign shooting under section 37 of the Income-tax Act, 1961.

Issue 1: Disallowance of medical expenditure under section 37:

The Revenue challenged the deletion of the addition of Rs 31,23,816 by the CIT(A) regarding medical expenses incurred on treatment during the production of a film. The Assessing Officer disallowed the medical expenses, arguing that the producer's role was limited to providing finance, and the presence of the assessee during shooting was not significant. The CIT(A) allowed the claim based on a jurisdictional High Court decision. The Revenue contended that the medical expenses were not wholly and exclusively for business purposes. The Tribunal noted that the medical expenses were incurred during shooting in the USA, and the insurance did not cover the individual due to age. Relying on precedent, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Issue 2: Disallowance of expenditure during foreign shooting under section 37:

The Revenue challenged the deletion of a Rs 5 lakh disallowance made by the Assessing Officer on an ad-hoc basis for expenditure during foreign shooting. The Assessing Officer disallowed the amount based on suspicion and lack of verifiable vouchers. The CIT(A) deleted the disallowance, emphasizing that since the accounts were audited, ad-hoc disallowance was not justified. The Tribunal observed that the Assessing Officer did not specify any defects in the vouchers and had not applied section 40A(3) of the Act. As the accounts were audited and no specific instances of unsupported expenses were identified, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the Appellate Tribunal ITAT, Mumbai upheld the CIT(A)'s decision in both issues, dismissing the Revenue's appeal and ruling in favor of the assessee regarding the disallowance of medical expenditure under section 37 and the ad-hoc disallowance of expenditure during foreign shooting.