2014 (1) TMI 1929 - AT - Income Tax

Difference in collections of movie - income from film distribution - As argued assessee had received only Rs.1.40 crores as per Memorandum of Understanding and over above collections of Rs.1.40 crores belongs to the distributors and therefore the Assessing Officer is not justified to make the entire collection in the hands of the assessee - HELD THAT - The claim of the assessee is that the share of the assessee was at Rs. 1.40 crores and others is relating to the share of Vaishnavi Academy of Rs.4, 42, 75, 200/- and also there was an expenditure in the nature of commission advertisement. But however there is no evidence furnished regarding these facts. In our opinion it is appropriate to examine the entire issue by AO and decide the issue in accordance with law. We make it clear that the agreement produced by the assessee is self-serving document and it cannot be acted upon as the assessee categorically stated before the AO that there was no agreement. Accordingly this issue is remitted back to AO for fresh consideration. Disallowance made towards expenditure not met by the assessee - contention of the assessee is that the amount of Rs.38 lakhs is incurred by two other parties namely Sri Venkateswara Films Rs. 5 lakhs and SS Communications Rs. 33 lakhs which was paid to Prasad Laboratories on behalf of assessee and according to the assessee the same to be allowed - HELD THAT - If these payments are not claimed as expenditure in the hands of these two parties then it is natural to allow the claim of the assessee. Being so it is appropriate to examine the issue in detail accordingly.

Summary

Issues:
1. Addition on non-accounting of cash receipts
2. Addition on account of difference in collections of movie
3. Disallowance of production expenditure

Analysis:

Issue 1: Addition on non-accounting of cash receipts
The assessee, a Director and Producer of movies, filed a return of income for AY 2007-08. The assessment was converted into scrutiny due to a survey u/s.133A. The AO made additions for non-accounting of cash receipts, difference in collections of the movie, and disallowance of production expenditure. The CIT(A) confirmed the addition for the difference in collections but allowed other grounds of appeal. The Authorized Representative argued that the distributor's statement showing gross collection of the movie was for informational purposes only. The Tribunal found discrepancies in the evidence presented and remitted the issue back to the Assessing Officer for fresh consideration.

Issue 2: Addition on account of difference in collections of movie
The AO added an amount towards the difference in collections of the movie based on the distributor's statement. The assessee claimed that the actual share was Rs. 1.40 crores, while the rest belonged to another entity. However, no evidence was provided to support this claim. The Tribunal deemed the agreement produced by the assessee as self-serving and remitted the issue back to the Assessing Officer for further examination.

Issue 3: Disallowance of production expenditure
The AO disallowed Rs. 38 lakhs as production expenditure, stating it was not actually incurred by the assessee. The CIT(A) disagreed, noting that distributors had made payments on behalf of the appellant, which were later adjusted. The Tribunal upheld the CIT(A)'s decision, allowing the expenditure and setting aside the disallowance made by the AO. The departmental appeal was allowed for statistical purposes.

In conclusion, the Assessee's Appeal was partly allowed for statistical purposes, while the Revenue's appeal was allowed for statistical purposes. The Tribunal's decision was pronounced on 10.01.2014.