2018 (12) TMI 1642 - AT - Income Tax

Addition of advances received - assessee claims that the addition received by way of banking channel - HELD THAT - The assessee now filed an affidavit before this Tribunal from the said Shri V. Radhakrishnan and contends that the said Shri Radhakrishnan has confirmed the payment of ₹ 30 lakhs. In view of the factual situation, this Tribunal is of the considered opinion that the matter needs to be reexamined by the Assessing Officer. Disallowance of advertisement expenses - HELD THAT - As per the agreement between the assessee and the film producer, the assessee has to produce the film and hand over it to the producer. The marketing and advertisement made for the purpose of exhibition of film are the functions of the producer and not the Director. The role of the director is only to direct the film and after completion, it has to be handed over to the producer. It is for the producer to make necessary advertisement, if any, to exhibit the same for public view. In view of the above, this Tribunal is of the considered opinion that the expenditure of ₹ 18,06,000/- is not for the business of the assessee. The business of the assessee is only direction of film and not doing marketing for exhibition of film. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance towards editing charges - HELD THAT - Editing charges is part of production of film / direction. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, orders of both the authorities below are set aside and the issue of expenditure towards editing charges is deleted. Disallowance towards boarding and lodging - HELD THAT - Assessee being the director of the film has to travel and stay for his business purpose. Therefore, there is no justification to disallow the expenditure. Hence, this Tribunal is unable to uphold the orders of the authorities below. Addition of donation and entertainment expenses - CIT(Appeals) confirmed the addition made by the Assessing Officer on the ground that there is no agreement - HELD THAT - When the assessee is directing the film, he has to necessarily entertain certain people, who are employed in the course of production of film, in the course of his business of direction of cinema. Therefore, the assessee might have made donation of ₹ 250/- and expenses ₹ 400/- for entertainment in the course of his business of direction of film. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, orders of both the authorities below are set aside and the expenditure incurred towards donation and entertainment expenditure is deleted.

Summary

Issues:
1. Addition of ?12,84,362 received as an advance from a party.
2. Disallowance of advertisement expenses of ?18,06,000.
3. Disallowance of ?40,000 towards editing charges.
4. Disallowance of ?24,908 for boarding and lodging.
5. Disallowance of ?250 as donation and ?400 for entertainment expenses.

Issue 1: Addition of ?12,84,362 as an advance:
The appellant received an advance of ?30 lakhs from a party, supported by a confirmation affidavit and bank statements. The Tribunal noted that the entire advance was received through banking channels. The matter was remitted back to the Assessing Officer for reexamination in light of the evidence provided by the appellant.

Issue 2: Disallowance of advertisement expenses of ?18,06,000:
The appellant, a cinema director, incurred advertisement expenses during film production. However, the Tribunal found that marketing and advertisement for film exhibition were the producer's responsibility, not the director's. As the expenses were not related to the appellant's business of directing films, the disallowance was upheld.

Issue 3: Disallowance of ?40,000 for editing charges:
The Tribunal determined that editing charges were part of film production and direction, leading to the deletion of the disallowance made by the lower authorities.

Issue 4: Disallowance of ?24,908 for boarding and lodging:
The Tribunal disagreed with the disallowance of boarding and lodging expenses, considering them justified for the appellant's business purposes as a film director. Therefore, the disallowance was deleted.

Issue 5: Disallowance of ?250 as donation and ?400 for entertainment expenses:
The Tribunal concluded that the donation and entertainment expenses were incurred in the course of the appellant's business of directing films. As there was a business necessity for these expenses, the disallowance was deleted.

In conclusion, the appeal by the appellant was partly allowed for statistical purposes, with specific disallowances being deleted or upheld based on the Tribunal's analysis of each issue.