2016 (4) TMI 568 - AT - Income Tax

Addition made towards the professional receipts - Held that - The amounts received by the assessee from various producers towards advances cannot be assessed as income of the assessee. Therefore, we set aside the orders of the lower authorities and delete the additions in respect of the advances treated as income of the assessee - Decided against revenue Addition made on interest on OD as personal expenditure in nature - CIT(A) observed that when the assessee himself disallowed 25% of total interest expenditure there is no basis for AO to disallow arbitrarily 75% of total interest expenditure - Held that - AO had not brought on record any material to show that the interest expenditure incurred to the extent of 75% on his personal purpose. Had it been any material to suggest that the so called borrowed amount was used by the assessee for his personal benefit, not for the professional business, the AO would justified. In the absence of any material brought by the AO, we are not in a position to uphold his order. Accordingly, we do not interfere with the order of the Ld.CIT(A) and the same is confirmed.- Decided against revenue

Summary

Issues Involved:
1. Deletion of addition towards professional receipts of Rs. 94.73 lakhs.
2. Deletion of addition on interest on OD amounting to Rs. 13.16 lakhs as personal expenditure.

Detailed Analysis:

1. Deletion of Addition Towards Professional Receipts of Rs. 94.73 Lakhs:
The Revenue's first grievance was that the CIT(A) erred in deleting the addition of Rs. 94.73 lakhs, which was considered as income for the year under consideration. The brief facts reveal that the assessee, a film actor, received an advance of Rs. 94,73,330/- for acting in the film 'JAGGUBAI' and took credit for the TDS certificate for this income. However, the corresponding income was not offered in the assessment year 2008-09 but instead in 2010-11. The AO brought the entire amount for taxation in the assessment year 2008-09 based on the TDS certificate. On appeal, the CIT(A) deleted the addition, reasoning that the amount was subject to tax for the assessment year 2010-11 as it was only an advance received in 2008-09.

Upon hearing both parties, the Tribunal referred to a similar case of Shri Mr. R.S. Suriya Vs. ACIT, Chennai, where it was held that token advances received by the assessee cannot be assessed as income during the assessment year if the assignments were not materialized and the advances were returned in subsequent years. The Tribunal observed that the assessee had shown these advances as liabilities in the balance sheets, and since the proposed assignments were not finalized, the advance token receipt could not partake the character of income for the assessment year under consideration. The Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's ground, confirming that the amounts received as advances could not be assessed as income of the assessee.

2. Deletion of Addition on Interest on OD Amounting to Rs. 13.16 Lakhs as Personal Expenditure:
The Revenue's second grievance was regarding the deletion of Rs. 13.16 lakhs from the interest on OD, which was considered personal expenditure. The assessee incurred an interest expenditure of Rs. 26,24,763/- and disallowed Rs. 6,56,191/- towards personal expenditure. The AO disallowed 75% of the total interest expenditure, amounting to Rs. 26,24,763/-, and disallowed an additional Rs. 13,12,381/-, totaling Rs. 1,97,75,702/- towards personal expenditure of interest. On appeal, the CIT(A) observed that the AO had no basis for disallowing 75% of the total interest expenditure arbitrarily when the assessee had already disallowed 25%.

The Tribunal, after hearing both parties, noted that the AO did not provide any material evidence to show that 75% of the interest expenditure was incurred for personal purposes. In the absence of such material evidence, the Tribunal upheld the CIT(A)'s order, confirming that the AO's disallowance was unjustified.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The professional receipts of Rs. 94.73 lakhs were rightly not considered as income for the assessment year 2008-09, and the disallowance of Rs. 13.16 lakhs as personal expenditure on interest was correctly deleted due to lack of evidence from the AO. The order was pronounced on March 11, 2016, in Chennai.