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TMI Blog2015 (9) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ms is to be assessed in the year in which the contract is performed and not in the year of receipt. Counsel for the assessee submits that the assessee in the present case is a music director and received advances from Sri Rajalakshmi (P) Ltd. and Film Workes, Boat Club. So far as the advance of Rs. 9,50,000/-received from Sri Rajalakshmi P.Ltd., counsel submits that as no project materialized the advance was subsequently refunded in June/July, 2005 and with regard to advance of Rs. 3,00,000/- received from Film Workes, counsel submits that the amount is still outstanding as on date, therefore placing reliance on the order of the co-ordinate Bench in the case of R.S.Suriya (supra), counsel submits that advances received by the assessee are not taxable in the assessment year 2005-06. 3. Departmental Representative supports the order of Assessing Officer. 4. Heard both sides. Perused orders of lower authorities and the decision relied on. The Assessing Officer brought to tax a sum of Rs. 12,50,000/- received by the assessee from two concerns namely Sri Rajalakshmi (P) Ltd. and Film Workes, Boat Club. These amounts were assessed to tax rejecting the contentions of the assessee that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the advances were received only for exploration of possibility for working in a project and as no project materialised, the advances were subsequently refunded. The decision of the Hon'ble ITAT, Chennai in the case of R.S.Suriya is therefore applicable to the fact of these advances. 15. Accordingly, I hold that advance of Rs. 3,00,000/ from M/s Film Works is assessable as professional income of the appellant on receipt basis and advances of Rs. 9,50,000/ received from M/s Sri Rajalakshmi (P) Ltd are not assessable as professional income of the appellant in assessment year 2005-06 The addition of Rs. 12,50,000/-made in the assessment order by the A.O is, therefore, sustained at -Rs.3,00,000/-." 5. The co-ordinate Bench in the case of R.S.Suriya Vs. ACIT in ITA Nos.1944 to 1946/Mds/2014 dated 30th June, 2015 has considered an identical issue and held that advances received cannot be assessed in the year of receipt but has to be assessed in the year of performing contract. The co-ordinate Bench considered its earlier decisions while deciding the issue as under:- "5. Heard both sides. Perused orders of lower authorities and the decisions relied on. In this case, search was cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the films in future. There is no written agreement between the assessee and the producers of the films. The assessee has shown these advances as liability in the balance sheets and in view of the peculiar fact that in the subsequent years these advances were returned by the assessee as the proposed assignments were not materialized the advance token receipt cannot partake the character of income for the assessment year under consideration. The Commissioner of Income Tax (Appeals) has relied upon the Hon'ble jurisdictional High Court in the case of Lakshminarayana Films Vs. CIT (supra), wherein the amounts were to be received by the assessee as per the written agreement and on completion of certain formalities in future. Therefore, the Hon'ble High Court has held that the amounts would be income of the assessee in the year in which the said amounts were received on completion of the conditions as per the agreement and cannot be said as accrued at the time of execution of agreement. In our view, the facts of the case in hand are distinguishable and the decision of the Hon'ble jurisdictional High Court relied upon by the CIT(A) is not directly applicable because in the present case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraph 8 and 9 as under: "8. We have considered the facts of the case and rival submissions. We may refer to the charging section 4 of the Act to the effect that income tax shall be charged for any assessment year (It the rate or rates provided in any Central Acts in respect of the total income of the previous year of every person. Section 5 deals with the "scope of total income", which is defined in respect of any previous year in terms of accrual, deemed accrual, receipt and deemed receipt, etc. Section 145 deals with the method of accounting in respect of "profits and gains of business or profession" or "income from other sources". Thus, while sections 4 and 5 deal with the scope of income and its charge to income tax, section 1.45 is a procedural section regarding the method to be followed for recording of income in the books of account. It is no doubt true that for the assessment year 1997-1998 and onwards, the assessee can follow either the cash or the mercantile system of accounting and the hybrid system of accounting is prohibited. However, what is to be taxed is income and receipt of an amount is not be the basis for the levy of the tax. In the case of Messrs. Shoorji V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be taken as a general proposition of law to be followed in every case as it was confirmed to the facts of that case. We may add that if a manifestly wrong decision has been taken by the Assessing Officer in one year or in a number of years/ it will not bind the Assessing Officer in tile assessment of a subsequent year because there cannot be any estoppel against the law. However, in this case, we find the earlier and subsequent assessment were made on correct appreciation of the principle of the cash system of accounting. Since the assessee succeeds on merits on this aspect, there is no need for us to give a finding that the Assessing Officer was bound in this year to follow the past or future assessment" 8. Since, the facts and circumstances of the case in hand are similar to the case relied upon by the assessee. Therefore, following the decision of this Tribunal as well as the Delhi Benches of this Tribunal; we hold that when the assessee has shown as these advance receipt as liability in his balance sheet and tile advances were not on the finalization of any agreement but were received as a token amount for giving a priority to the parties to negotiate for future assignm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions of A. Ramki (supra) and D .Meena; the former case was decided relying on the latter decision. If we advert to the decision of D.Meena's case, there the assessee who was also a cine artist, had received advance on the basis of a contract for acting in a film. In other words, there was a subsistent contract foracting in a particular- film, whereas in the given case the advances were received from two parties with no clear crystallization of film or the storyline or other aspens of the proposed film. Hence, we are of the opinion that D. Meena' s case (supra) is not applicable here on facts. In any event, since this Tribunal had taken a view in favour of the assessee in assessee's own case for earlier years on similar fact situation, we find no compelling reasons to depart from the view taken earlier. Therefore, we find that amount of Rs. 55 lakhs received by the assessee as advance could not have been treated as his income for the impugned assessment year. Such addition stands deleted. Grounds number 2 to 9 of the assessee are allowed." We also find that the co-ordinate Bench has distinguished the decisions relied on by the Departmental Representative in the case of Ms. D.Mee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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