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TMI Blog2015 (11) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment years 2004-05 to 2006-07 respectively. The assessments were completed under section 143(3) read with section 153A of the Act on December 30, 2011 for all these assessment years and while completing the assessments, the Assessing Officer brought to tax advances received from various producers as income of the assessee. The assessee contended that these amounts received by the assessee are only advances and since the films were not commenced these advances cannot be taxed as income of the assessee and it should be taxed in the year in which film shooting/production commenced as income of the assessee. On appeal, the Commissioner of Income-tax (Appeals) sustained the additions treating the said amounts as income of the assessee for the reason that the assessee is following cash system of accounting and therefore they have to be considered as income of the assessee, against which the assessee is in appeal before us. 3. The authorised representative for the assessee submits that the advances brought to tax in the hands of the assessee were already assessed while completing the assessments under section 143(3) of the Act for all these three assessment years. There was no i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 596 and 597/Mds/2009 dated August 21, 2009 for the assessment years 2004-05 and 2005-06 and by I. T. A. No. 1329/Mds/2009 dated January 19, 2010 for the assessment year 2006-07 (R. S. Suriya v. Deputy CIT [2010] 2 ITR (Trib) 746 (Chennai)). We also find from the order of the Commissioner of Income-tax (Appeals) that though the assessee produced these orders of the Tribunal, he failed to follow these orders stating that the assessee has not produced the written agreements and therefore, he was of the view that unless written agreements are produced, the orders cannot be followed and he tried to distinguish the orders passed by the Tribunal. The authorised representative for the assessee referring to page 18 of the paper book, which is at para 5 of the co-ordinate Bench of this Tribunal order for the assessment years 2004-05 and 2005-06, brought to our attention wherein there is a specific finding by the co-ordinate Bench stating that no written agreement between the assessee and the producers of films were entered into. Therefore, in the absence of any written agreement the Commissioner of Income-tax (Appeals) should not have tried to distinguish the orders of the Tribunal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to finalising the proposed assignment ? It is also important to note that on accepting the amounts, the assignments itself is not finalised but the finalisation of the assignment is also dependant on acceptance of the terms and conditions mutually by both the parties. When the assessee has returned these amounts in the subsequent years as the proposed assignment were not materialised then it would not be proper and appropriate to treat these amounts as income of the assessee. In the case of Shri S. Priyadarsan v. Joint CIT (supra), the Tribunal has held in para 5 as under : '5. After carefully considering the record available with the Tribunal and in the light of the arguments advanced on behalf of both the parties, we find that the assessee had shown the disputed amount of Rs. 25 lakhs in the list of sundry creditors in the balance-sheet filed by him for the period ending March 31, 1997. As per the contention of the assessee only that part of the advance is treated as income for which he rendered service to the giver of the advance and the balance was shown as credit in the accounts. So when once the said advance is shown as credit the same cannot be treated as income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has to be recorded as per the system of accounting followed by the assessee in view of section 145 of the Act, because the substance of the matter is 'income'. Therefore, there is an infirmity in the order of the learned Commission of Income-tax (Appeals) in paragraph 4.7 where it was stated that the entire amount received whether arrears or advance is to be shown as income under the cash system of accounting. The correct position would be that the entire income received, whether arrear or advance of income, has to be shown as income under the cash system of accounting. Coming to the facts of this case, the assessee received certain amounts for services to be performed over a period of time. The amount relatable to the services rendered in the year under consideration was shown as income, the reason being that the assessee became entitled to receive that amount from the client in respect of the services rendered. In other words, debt to the extent of the amount pertaining to services rendered only got vested in the assessee. The rest of the amount was taken as liability to be adjusted in subsequent years as and when the service was rendered. It is but clear that the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated January 19, 2010 (R. S. Suriya v. Deputy CIT [2010] 2 ITR (Trib) 746 (Chennai)) held as under (page 749) : "8. We have perused the orders of the authorities below and heard the rival contentions. There is no dispute that the learned Commissioner of Income-tax (Appeals) had confirmed the advance professional fee of Rs. 55 lakhs as income for the impugned assess ment year relying on his own decision in the assessee's appeals for the assessment years 2004-05 and 2005-06. It is clear from the assessment order itself that the amounts received by the assessee from M/s. Photon Factory and M/s. Studio Green were not against any particular films. The assessee's contention that income could not be recognised till the artist had acted in the film, for which the advances were received, carries great strength. Storyline was not fixed, neither was the name, not even the co-artists were known. Just because the assessee was following the cash system, it was not obliged to consider all sums received by it as income unless such receipt could be categorised as income. Whether it is the cash system or mercantile system, a receipt can be treated as income only if such income can be co ..... 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