2016 (6) TMI 47 - AT - Income Tax

Treatment of receipt from sale of film scripts - income from other sources OR business income - Held that - The assessee has failed to place on record any material evidence to controvert the findings of the learned Commissioner of Income-tax (Appeals)/Assessing Officer that the income from sale of film scripts is to be treated as Income from other sources and not Business income as claimed and consequent disallowance of various expenses claimed by the assessee. In this view of the matter, we are of the opinion that there is no sufficient reason for us to interfere with or deviate from the findings in the impugned order of the learned Commissioner of Income- tax (Appeals) and therefore uphold the same. - Decided against assessee Charging of interest under section 234A, section 234B, section 234C and section 234D - Held that - The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the hon ble apex court in the case of CIT v. Anjum M. H. Ghaswala 2001 (10) TMI 4 - SUPREME Court and we therefore uphold the action of the Assessing Officer in charging the assessee the said interest. The Assessing Officer is, however, directed to recompute the interest chargeable, if any, under section 234A, section 234B, section 234C and section 234D of the Act while giving effect to this order.

Issues Involved:
1. Treatment of income from the sale of film scripts as "Income from other sources" vs. "Business income".
2. Disallowance of various expenses claimed by the assessee.
3. Charging of interest under sections 234A, 234B, 234C, and 234D of the Income-tax Act.
4. Stay on recovery proceedings.
5. General grounds related to the appeal.

Detailed Analysis:

1. Treatment of Income from Sale of Film Scripts:
The primary issue revolved around whether the income of ?32,00,000 from the sale of film scripts should be treated as "Business income" or "Income from other sources." The assessee, a company engaged in providing technical services for cine equipment, claimed that the sale of film scripts was part of its business activities. However, the Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)) determined that the income should be treated as "Income from other sources" because the company was not engaged in the business of writing cine scripts. The AO noted that a company, being an artificial entity, cannot write a cine script, which is a human activity. The CIT(A) supported this view, stating that the company's memorandum of association did not include script writing as an object of the company. Thus, the income from the sale of scripts was not considered part of the business activity.

2. Disallowance of Various Expenses:
The AO disallowed various expenses claimed by the assessee, amounting to ?33,93,508, on the grounds that there was no business activity during the year. The CIT(A) upheld this disallowance, noting that the company had no equipment for hire, and the expenses were not attributable to earning the income from the sale of scripts. However, the CIT(A) allowed a deduction of ?1,00,000 on an estimated basis under section 57(iii) of the Income-tax Act, considering it as expenditure laid out or expended wholly and exclusively for the purpose of making or earning the income from the sale of scripts.

3. Charging of Interest under Sections 234A, 234B, 234C, and 234D:
The assessee contested the charging of interest under sections 234A, 234B, 234C, and 234D of the Income-tax Act. The tribunal upheld the AO's action, stating that the charging of interest is consequential and mandatory, as upheld by the Supreme Court in the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC). The AO was directed to recompute the interest chargeable while giving effect to the tribunal's order.

4. Stay on Recovery Proceedings:
The assessee sought a stay on recovery proceedings, considering the facts of the case. However, this ground was dismissed as infructuous because the assessee had not filed a separate stay petition as required.

5. General Grounds Related to the Appeal:
The remaining grounds raised by the assessee were general in nature and did not require adjudication. Consequently, these grounds were dismissed as infructuous.

Conclusion:
The tribunal dismissed the assessee's appeal for the assessment year 2009-10. The income from the sale of film scripts was upheld as "Income from other sources," and the disallowance of various expenses was largely upheld, with a minor allowance of ?1,00,000. The charging of interest under sections 234A, 234B, 234C, and 234D was upheld, and the request for a stay on recovery proceedings was dismissed.

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