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2017 (1) TMI 1140 - AT - Income TaxDisallowance of business Loss - CIT(A) held that in the absence of documentary evidences to substantiate the assessee s claim in respect of the above loss on financing of films, the loss claimed cannot be allowed - Held that - In the factual matrix of the case, as discussed above, we are inclined to agree with the conclusions of the authorities below since even before us the assessee except for raising this grounds has failed to file any documentary evidence to establish the claim of losses incurred in financing of the films Jungle Love , Dudhwali and Autowali amounting to ₹ 6,38,615/-. Finding no reason to interfere with the finding of the learned CIT(A) on this issue, we uphold the same and consequently dismiss grounds raised by the assessee. Deemed Dividend under section 2(22)(e) - Held that - Respectfully following the ratio of the decisions of the Hon ble Bombay High Court in the case of Universal Medicare Pvt. Ltd. (2010 (3) TMI 323 - BOMBAY HIGH COURT) and the decision of the Coordinate Bench of the Tribunal in the assessee s own case for A.Y. 2006-07, we hold that the provisions of section 2(22)(e) of the Act are not applicable in the case of the assessee and accordingly uphold the finding of the learned CIT(A) in deleting the addition made by the AO under section 2(22)(e) of the Act.- Decided against revenue Disallowance of Bad Debts - Held that - AO while relying on the provisions of section 36(2)(i) of the Act to deny the assessee s claim for write off of bad debts has failed to observe that sub clause (i) of section 36(2) of the Act provides an exception in the case of money lending business; which in our view, the assessee is engaged in as per Article 22 of its MOA and that is evidently so as per the facts on record. In this factual and legal matrix of the case as discussed above, we agree with the finding of the learned CIT(A) that the sum written off represents money lent to Mayura Films for financing the film Ganga Jamuna and therefore the claim of write off of the bad debts thereof is to be allowed under section 36(i)(vii) r.w.s. 36(2) of the Act. We hold and direct accordingly. - Decided against revenue Disallowance of Interest - Held that - We find from a perusal of the material on record that, as observed by the learned CIT(A), the AO has not brought on record any evidence to prove that the interest paid by the assessee or advances made by assessee was not for business purposes. Neither before the authorities below or before us, has the Revenue been able to contravene the finding of the learned CIT(A) that the assessee has filed the complete details of advances made and basis of not charging interest. In this factual matrix of the case, as discussed above, we uphold the finding of the learned CIT(A) in deleting the disallowance of interest - Decided against revenue
Issues Involved:
1. Disallowance of business loss. 2. Deemed dividend under section 2(22)(e). 3. Disallowance of bad debts. 4. Disallowance of interest. Issue-wise Detailed Analysis: 1. Disallowance of Business Loss: The assessee, engaged in the business of film making and film financing, claimed a business loss of ?6,38,615/- from financing films. The Assessing Officer (AO) disallowed this claim due to lack of documentary evidence, noting that except for the home production 'Badla', other films were produced by 'Mayura Films' without sufficient evidence to substantiate the losses. The CIT(A) upheld this disallowance, and the Tribunal agreed, dismissing the assessee's appeal on this issue due to the absence of any material evidence to support the claim. 2. Deemed Dividend under Section 2(22)(e): The AO added ?33,95,000/- as deemed dividend under section 2(22)(e). The CIT(A) deleted this addition, following the precedent set in the assessee's own case for A.Y. 2006-07, where it was held that deemed dividend can only be assessed in the hands of a shareholder, not in the hands of a non-shareholder entity. The Tribunal upheld the CIT(A)'s decision, referencing the Special Bench ruling in ACIT vs. Bhaumik Colour P. Ltd. and the Bombay High Court decision in CIT vs. Universal Medicare Pvt. Ltd., confirming that the provisions of section 2(22)(e) were not applicable to the assessee. 3. Disallowance of Bad Debts: The AO disallowed the write-off of bad debts amounting to ?12,56,664/-, arguing that the amounts were not offered for taxation in earlier years. The CIT(A) allowed the claim, noting that the assessee was engaged in the business of film financing, which falls under the exception in section 36(2)(i). The Tribunal agreed, stating that the sum written off represented money lent for film financing, thus allowable under section 36(i)(vii) r.w.s. 36(2). 4. Disallowance of Interest: The AO disallowed interest expenses totaling ?10,74,873/-, questioning the decline in the assessee's financing business income. The CIT(A) deleted this disallowance, observing that the AO did not provide evidence that the interest paid or advances made were not for business purposes. The Tribunal upheld this decision, noting that the assessee had provided complete details of advances and the basis for not charging interest, and the Revenue failed to contravene these findings. General Grounds: Ground Nos. 5 and 6 raised by the Revenue were dismissed as infructuous, as they were general in nature and not urged before the Tribunal. Conclusion: Both the cross appeals by the assessee and the Revenue were dismissed. The Tribunal upheld the CIT(A)'s order, providing partial relief to the assessee and rejecting the Revenue's contentions. The order was pronounced in the open court on 20th January, 2017.
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