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TMI Blog2013 (8) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... r production of advertisement films: M/s Ogilivy Mathew Pvt. Ltd Rs.25,50,000/- M/s ITC, Ltd. Rs.20,50,000/- M/s R.K.Swamy BBDO Pvt. Ltd Rs.30,00,000/- Rs.76,00,000/- 5. The Assessing Officer further observed that the assessee explained that the amounts were the advances received for the advertisement films and that the said projects were completed during the next financial year relevant to assessment year 2009-10 and the full receipts were shown as income in that year. The assessee also stated that expenses incurred of ₹ 52,63,602/- during the year on these projects were carried forward to subsequent year as closing stock. The Assessing Officer did not accept the explanation of the assessee on the ground that once the bill is raised, the amount received gains the character of an income and cannot be treated as an advance. He also observed that the payee has deducted TDS on the payment made and the assessee has claimed the TDS on the advance at ₹ 6,10,366/- being ₹ 2,70,466/- received from M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the films the appellant obtains advance and the same is documented in agreement signed with the clients. On completion of the production of advertisement films, the appellant accounts advance as income. Correspondingly the appellant has also shown working progress in the asset side relating to projects under completion. The main point on which the AO brought the said advance to tax is on the ground that the bill is raised and hence it acquires the character of income. However the nature of the activity of the appellant is such that appellant is required to give an estimate which on approval by the client. results in appellant receiving advance to carry on production of advertisement films. Therefore I do not find any infirmity in the accounting of income by the appellant as expenditure relating to incomplete projects are carried forward and claimed in the year in which the income of the project is offered for tax. Therefore I do not see any justification in bringing to tax ₹ 76,00,000/- which has been offered to tax in the immediate succeeding year and I delete the addition. This ground of appeal is allowed. I A.Y 2009-10 4.2 On careful consideration I find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed for tax deducted at source, it does not mean that the corresponding income is chargeable to tax. Since the income is chargeable to tax on the basis of method of accounting regularly followed by the assessee and in respect of which no discrepancy has been noticed by the Assessing Officer, the addition was rightly deleted by the ld. CIT(A). 10. We have considered the rival submissions, perused the orders of the lower authorities and materials available on record. The assessee is engaged in the business of production of advertisement films. The assessee has shown the profit on project completion method. The assessee has shown ₹ 76 lakhs received in assessment year 2008-09 as advance in its Balance Sheet and shown corresponding expenditure of `52,63,602/- as work-in-progress on the ground that the related film was not completed during the assessment year 2008-09. According to the assessee, the related film was completed in assessment year 2009-10 and at that time the entire receipt of the film including advance of ₹ 76 lakhs was credited to the Profit Loss Account and also expenditure of the film including workin- progress of `52,63,602/- was debited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ITO vs Sikka International Freight Services (P) Ltd. [2011] 12 ITR 476(Del)(Trib) and the decision of the Mumbai Bench of the Tribunal in the case of Smt Varsha G. Salunke vs DCIT, 98 ITD 147(Mumbai)(TM) support the argument of the assessee that merely because the payee deducted ITDS on advance payment as per the provisions of the Income-tax Act, 1961, it cannot be concluded that advance so received by the assessee was the income of the assessee of that year. In view of the above, we do not find any good reason to interfere with the order of the ld. CIT(A) which is confirmed and the ground of appeal of the Revenue is dismissed. 13. Ground No.3 in both the appeals of the Revenue are directed against the order of the ld. CIT(A) holding that interest on the advances made to the Directors cannot be charged as it was the prerogative of the assessee to charge interest. 14. The brief facts of the case are that the Assessing Officer observed that the assessee has given advance to Directors and the amount outstanding as on 31.3.2008 was ₹ 65,17,542/- and the amount outstanding as on 31.3.2009 was ₹ 1,11,48,948/-. According to the Assessing Officer, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer, the assessee should have charged interest on the advances made to the Directors and therefore, he made disallowance of ₹ 75,282/- in assessment year 2008-09 and ₹ 1,01,441/- in assessment year 2009-10. 18. The ld. CIT(A) deleted the disallowance on the ground that no interest bearing funds were utilized for giving the advances to the Directors. He also observed that charging of interest was business decisions which should be taken by the businessman. 19. The ld. DR could not controvert the findings of the ld. CIT(A). We find that interest expenditure in question were incurred on the borrowed funds which were utilized for the business of the assessee is not in dispute and therefore, no exception to the decision of the ld. CIT(A) can be made. We, therefore, confirm the order of the ld. CIT(A) and dismiss the ground of appeal of the Revenue in botht he assessment years. 20. Ground No.4 of the appeal in assessment year 2009-10 is directed against the order of the ld. CIT(A) in holding that the provisions of section 40(a)(ia) cannot be invoked in the case of the assessee since the said amount of ₹ 1.42 crores was remitted before the due date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,794/- have been remitted during the month of July 2009 whereas the appellant being company the due date for filing for return is 30.09.2009. In the case of CIT Vs Virgin Creations the Hon'ble Calcutta High Court held that: We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted. It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A)(ia) is having retrospective operation or not. The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1,42,24,794/- on which TDS deducted was deposited by the assessee during the period 13.7.2009 to 21.7.2009. The Assessing Officer disallowed the expenditure of `1,42,24,794/- by invoking the provisions of section 40(a)(ia) of the Act on the ground that TDS deducted was not deposited during the financial year ending on 31.3.2009. 26. On appeal, the ld. CIT(A) allowed the claim of deduction to the assessee by following the decision of the Hon'ble Calcutta High Court in the case of CIT vs Virgin Creations (supra) wherein it was held that where the TDS deducted was deposited by the assessee within the due date of filing of return of income u/s 139(1) of the Act then no disallowance can be made u/s 40(a)(ia) of the Act. 27. The ld. DR has relied on the decision of the Chennai Bench of the Tribunal in the case of ACIT vs M/s Middle East Leathers(supra) wherein the issue was whether the expenditure paid during the financial year itself and no amount was outstanding to be payable as at the year end any disallowance could be made for non-deduction of TDS from the said expenditure under the provisions of section 40(a)(ia) of the Act. In that case, the ld. CIT(A), following t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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