9911796707
TMI Blog2017 (1) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... out at the business premises of the assessee on 10/09/2009. During the course of survey operation certain documents and computer back up of books of account in respect of production division were impounded. The computer back- up comprised of books of account for the AY.s2005-06-2008-09 and upto 10/09/2009. Impounded documents were verified with reference to audited financial statements for the AY.s.2005-06- 2007-08 filed with the returns of income. Vide his letter,07.10.2009, the AO pointed out certain discrepancies found in respect of receipts of movies released during the above period and the cost of production of the movies as worked out by the assessee in the documents as on 31/03/ 2007 i.e. relevant to AY.2007-08. The assessee by vide its letter dt. 30.10.2009 tried to reconcile the differences pointed out by the AO for all the three AY.s. After the perusal of the Explanation filed by the assessee, the AO observed that in the first statement the assessee had claimed that the unallocated income for the AY.2007-08 aggregated to Rs. 34.84 crores, that in the second submission the unallocated income for the AY.2007-08 was shown at Rs. 114.04 crores that there was vast difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility, that the company had paid tax in the next year at the same rate, that AO was not justified in holding that a fictitious liability was created to avoid tax payment, that it had vide letter dtd.07.12.2009, mentioned that the amount was credited by the distribution division on 31.3.2007 to HO division under the head unsecured loans, that vide letter dated 26.12.2009 it had informed that matter was under dispute and got settled in the AY.2008-09, that the amount of Rs. 3.14crores was shown as liability as the accounts were not finalised, that the income was offered for taxes before the date of survey. The assessee referred to the case of Modest Maritime Services Pvt. Ltd.(338ITR64) and Vishnu Industrial Gases P. Ltd. (122ITR119). After considering the submission of the assessee and the assessment order, the FAA observed that the amount of Rs. 3.14 crores, shown in the distribution division represented the liability of AY. 2005-06, that the AO had accepted the same as sundry creditors, that the disputed amount was claimed to represent the amount payable to KE pending account settlement, that the assessee itself had offered the same in the AY.2008-09 after making payment of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts in the year when the alleged liability had arisen, that the assessee claimed that there was dispute, that no evidence was produced before the revenue authorities about the alleged dispute, that even before us, no document was furnished to prove that the assessee had some dispute about the receipt.Even if, for sake of argument existence of dispute is accepted then, it was for Rs. 14 lakhs only. For such a small sum out of Rs. 3.14 crore, the assessee did not show the income during the year under consideration. 3.3.1. As per the provisions of section 5(1)(b) of the Act, when income accrues or arises or is deemed to accrue or arise to an assessee during the previous year, it is to be taxed in that year. The relevant yardstick is the time of accrual or arisal for the purpose of taxation, viz., in order to be chargeable, the income should accrue or arise to the assessee during the previous year. There must be a right to receive the income on a particular date. It is not the case of the assessee that such right did not exist during the year under appeal. Settled principles of taxation jurisprudence treats AY.a separate unit and income of each AY.has to determined in that parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On appeal, the FAA deleted the addition on the ground that the credit balance in the foreign exchange reserve account did not represent any profit or gain under Act. The Tribunal affirmed the order of the FAA. On a reference the Hon'ble Court affirmed the order of the Tribunal. In our opinion, the case is of no help to the assessee. In the matter before us, income had crystallized during the year and the assessee was supposed to pay taxes in that year only. We agree with the FAA that same income cannot be taxed twice. So, there should not be any addition of the impugned amount in any other year. Considering the above, we hold that there is no infirmity in the order of the FAA. Confirming the same, we decide Ground no.1 against the assessee. 4. Next ground is about disallowance of Rs. 1.62 crores under Rule 9A of the Income tax Rule 1962(Rules). During the assessment proceeding, the AO noticed that following expenses were incurred under the head 'advertisement and publicity' of the movies in respect of movies Fanna and Dhoom-2 SN. Movie Nature of expenses Amount (Rs.) 1. Fanna News Paper Ads 47,03,604/- 2. -do- Publicity Expenses 31,51,251/- 3. -do- Mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XX 49. A perusal of this Rule show that when the movie is released for exhibition on commercial basis, atleast 90 days before the end of such previous year, the entire cost of production of the film shall be allowed as deduction in computing the profits and gains of such previous year. It is only when the film is not released atleast 90 days before the end of such previous year , It is provided that the cost of production is restricted to the amount realized by the film producer. In the instant case, we find that all the three movies were released before 90 days from the end of the previous year. A perusal of the chart exhibited on page-542 of the paper book show that the assessee has shown aggregate income which is much higher than the cost of production of these movies. As the facts are in line with the provisions of Rule 9A(2), the entire cost of production deserve to be allowed. Accordingly, we direct the AO to delete the enhancement made by the Ld. CIT(A) at Rs. 4.93 crores and Rs. 1.39 crores. It would not be out of place to mention that the Ld. CIT(A) has made enhancement keeping in mind issues involved in ground No. 1 of this appeal. As we have allowed ground No. 1, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to the receipt account against the movie, that it had reduced its profit by Rs. 69.83 lakhs. Finally, he disallowed the claim made by the assessee and added a sum of Rs. 69,83,077/- to its the total income. 5.1. During the appellate proceedings before the AO the assessee argued that the AO had made the addition without appreciating the fact that payment was made to Adlab towards full and final settlement, that Adlab had confirmed the receipt in response to the letter issued by the AO u/s. 133(6) of the Act, that the AO had not offered any comments about the payments, that payments were allowable as normal business expenses and were deductible u/s.37(1) of the Act, that except for Krish the revenue for all the movies was offered for taxation in earlier year the small amount for taxation, under dispute was settled during the year under appeal, that it followed accrual system of accounting, that till the expenses were not crystallised same would not be accounted for. Assessee placed reliance on Goetze India Ltd. (112 TTJ 1) and Ciba Speciality Ltd.(7 SOT 510). After considering the submission of the assessee and the assessment order the FAA held that Adlab had confirmed that pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had debited Rs. 6.93 crores to P&L account in respect of distribution expenses, most of expenses was incurred on publicity and print cost, that expense incurred on account of cost of printing and advertisement as per Rule 9B of the Rules, that other expenses incurred on account of payment of sub distributor/audit fee, depreciation and other general expenses could be allowed. Finally, out of the total expenditure of Rs,.6.93 crores, the AO made a disallowance of Rs. 4,55,60,396/-. 6.1. Before the FAA the assessee argued that the total expense of Rs. 6.93 crores was incurred for the purpose of distribution division, that the expense was legitimate business expense and hence allowable, that the expenses in question were not covered under Rule 9B of the Rules, that Rule 9A was not applicable to the expenses, that if an assessee would not spend money on publicity and print cost the revenue would be adversely affected. It referred to certain cases in support of the claim, that advertisement and marketing expenses incurred for promoting the product was allowable as revenue expenditure, that Rule 9A/9B would not over rule the general provisions of the Act, that said Rules did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Ledger account of the producer of the movie, that there was no concealment of income loss to revenue as the income was shown by the producer of the film. After considering the submission of the assessee, the FAA verified the Ledger account of the HO from where the payments were made and the amounts were collected. He held that amount from the books of accounts had been set off against the collection and the amount paid to the producer of the movie, that the recipient company had come from the receipt of the balance amount, that the fact of payment could not be denied, that the action of the AO treating the income as unaccounted receipts was unwarranted, that the payment of Rs. 8.72 lakhs to the producer of the film cannot be denied, that the remaining expenditure of Rs. 1.01 lakhs could not be allowed to the appellant in the absence of its claim in the regular books of accounts. 7.2. Before us, the AR contended that the assessee had not claimed the expenditure in the books of account, that it had not asked for any deduction, that no addition could be made when expenditure was not claimed. The DR stated that assessee did not file any reconciliation. 7.3. We have heard the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the remaining professional fee of Rs. 9crores paid to other directors he made proportionate allocation among the 14 movies(11 movies under production + 3 movies released during the year). He treated Rs. 64.28 lakhs as cost of production of movie. Finally, he allowed an expenditure of Rs. 1.92 crores (Rs. 64. 28 lakhs x 3) and capitalised the balance amount, i.e. Rs. 7.07 crores. 8.1. After considering the submissions of the assessee and the assessment order, the FAA held the AO had not disputed the allowability of remuneration to the directors of the films produced by the assessee, that the argument advanced by the assessee to the effect that directors of the films were different from the directors of the company was meaningless, that the AO had not apportioned the amount payable to the film directors under any such confusion, that he had merely held that when the services of directorship of films were being rendered in respect of 11 films during the year, then the remuneration received for such professionals during the year should be distributed among the 11 films rather than among three films completed and released during the year, that the AO had also not disputed the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at maximum marginal rate, that there was neither tax planning nor tax evasion, that she had sung songs in various films, that she had also written the story of a few films, that she was also an associate producer of many of films, that the AO could not decide as to what was reasonable and what was not, that she had acted in capacity as a director as per her calibre, knowledge and experience. The assessee produced various documents, before the FAA, to prove that PC had rendered services to the company. The assessee relied upon the cases of Indo Saudi Services (Travel) (P.) Ltd. (219 CTR 562). After considering the available material, the FAA held that the AO could not substitute himself in the shoes of head of HRD division of the company, that he was authorised by law to go into the question whether the expenditure claimed was wholly and exclusively for the purpose of business or not, that he had noticed from the survey proceedings and the visit of the inspector that deduction was claimed in the absence of rendering of services, that the expenditure incurred by the assessee was not wholly and exclusively for the purpose of the business, that it was also hit by the provision of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editing of films, ensuring the film gets adequate publicity and distribution of the films in various locations. Regaring the remuneration paid to Mrs. Payal Chopra, it was submitted that it was for set decoration, set construction, design etc. It was also pointed out that Mrs. Payal Chopra also co-ordinates with dress and costume department for various items of work. 19.1. After considering the facts and submissions brought on record, the Ld. CIT(A) formed a belief that directors remuneration should be commensurate with the services rendered by them. The Ld. CIT(A) was of the opinion that the Directors did not render any specialized or specific service in the production of the three films. In the opinion of the Ld. CIT(A) the assessee was not able to specify what particular skilled services were rendered by the directors for the production of the three movies. Whatever services put by the Directors mentioned by the assessee, the Ld. CIT(A) was of the opinion that there are specialists in the film making who look after those services and are suitably paid for the services. Therefore, the assessee has failed to establish that additional specialized skilled services were rendered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this line of business, in our considerate view, the remuneration paid to the Directors was reasonable and commensurate with the services provided by them. Accordingly, we direct the AO to delete the addition made by him and also delete the enhancement done by the Ld. CIT(A). Ground No. 3 is accordingly allowed." 8.4.a. We would also like to discuss the remuneration paid to PC. It is found that the AO or the FAA have not doubted the ability of PC in rendering services to the assessee, that an independent agency has also certified that she was capable of handling the work related with movies, that she had shown the money received from the assessee in her individual return of income, that she had paid taxes at maximum marginal rate for the remuneration received by her. Considering these facts and the above referred order of the Tribunal, we are of the opinion that the AO/FAA was not justified in disallowing remuneration paid to the directors. Ground no.6 and 8 are decided in favour of the assessee and ground no.7 is allowed for statistical purposes. 9. Ground 11 is about addition about the satellite income. During the assessment proceedings, the AO found that an agreement betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appeal for the AY.2006-07, that his predecessor had also considered the cases and opinion available on the issue, that he had held that income accrued on the date of linking the agreement, that there was no reason to deviate from his finding, that the AO had not allowed credit of Rs. 9.40 crores and had made the protective assessment. Accordingl, he directed the AO to grant relief to the extent of Rs. 9.40 crores. He further observed that if the assessee would get relief at higher form of appeal regarding the non-taxability of Rs. 9.40crores in the AY.2006-07, the disputed amount would be treated as income for the year under consideration. 9.2. We find that, while deciding the appeal for the AY.2006-07(ITA/3345/Mum/2012, dtd,05.04. 2013)the Tribunal has dealt the identical issue as under: 3. In ground No.1 the assessee has challenged the addition of Rs. 9,40,00,287/- in respect of satellite income for F.Y. 2005-06. It is the say of the assessee that the total receipt was not accrued in the year under assessment. This issue has been discussed by the AO at para-4 on page-2 of his order. During the course of the assessment proceedings, the Assessing Officer noticed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicata do not apply to income tax proceedings. The Ld. CIT(A) finally concluded that the method of recognition of revenue from satellite rights adopted by the assessee leads to following hybrid system of accounting which is not in sync with Sec. 145 of the Act and confirmed the addition of Rs. 9,40,00,287/-. XXXXXXX 8. We have considered the rival submissions and perused the orders of the lower authorities and the decisions relied upon by the assessee alongwith the material evidences brought on record in the form of paper book. A careful perusal of the agreement show that the licencee i.e. SET Satellite Singapore Ltd. acquired rights to exhibit the movies 24 times during the licence period and since the licence period is for four years the SET Satellite could exhibit the movies not more than six times in each year which means that the transferee has 25% right of exhibiting the moves in each year which further means that the right only for 25% of the licence fee has accrued to the assessee in the first year. Therefore, the plea of the AO that the entire income has accrued to the assessee as soon as the agreements have been executed is not correct. The licence fee did not accru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vies produced by it to enhance the cost of production and to reduce the profit to that extent, that the onus was on the assessee to prove that an expenditure of Rs. 6.80 crores was actually incurred for producing the movies, that it had not produced any evidence such as confirmation from the respective parties, that it had not given any specific detail is too under which had the above amount of Rs. 6.80 crores was incurred, that the disputed amount did not relate to the receipts credited to the dissolution division, that same had to be disallowed under the head unexplained expenditure as per the provisions of section 69C of the Act. 10.1. During the appellate proceedings, the assessee argued that the expenses towards distribution of the movies were nothing but the amount paid to the producers towards minimum guarantee, print cost and processing cost etc., that the cost of print and processing were not covered under rule 9B of the rules, that same were covered under section 37 of the Act, that no film could be released without print and publicity expenses, that such expenses were shown in production division, that the production dividend had worked as a producer, that the distribut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs on the ground that such publicity expenses are not allowable as per Rule 9A and 9B of the Rules. It is the say of the Counsel that Rule 9A and 9B do not preclude the assessee to claim such genuine business expenses u/s. 37(1) of the Act. Since only ground for disallowing publicity expense is that such expenses are not allowable as per Rule 9A,9B, we find force in the submission of the Counsel that such expenses can be allowed u/s. 37(1) of the Act. However, since the AO has not considered this aspect as the additions have been made by the Ld. CIT(A) during the appellate proceedings, in the interest of justice and fair play, we restore this issue back to the files of the AO. The AO is directed to verify the claim of publicity expenses vis-avis business of the assessee for the year under consideration. The AO should also verify how much publicity expenses have been recovered by the assessee and credited to its Profit and loss account for the year under consideration. The assessee is directed to furnish necessary details to substantiate its claim of publicity expenses. Ground No. 15 is allowed for statistical purposes." We further find that in the case of Dharma Productions (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he person carrying on the business of production of feature films may either keep them without exhibition or even part with them without making arrangements for their exhibition. It cannot, therefore, be assumed that in all cases of production of a film, the producer must necessarily obtain the positive prints of the film as well. In other words, if a person carries on the business of production of films, he may not only produce the films but also prepare the positive prints for the purpose of exhibition or he may not take steps for the exhibition of the film having produced it. The production and exhibition of a feature film constitutes two distinct and separate stages and while the former would take in all activities which culminate in the production of a feature film, the latter contemplates stage subsequent to the completion of the production of the film, viz., exhibition of the film produced. Viewed thus, any expenditure incurred in connection with the preparation of the positive prints for purposes of exhibition would really be post-production expenses and also an item of expenditure in relation to the business of production and exhibition of feature films and would, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cost of production. The effect of the exclusion of these two items normally means that they could be allowed in the year in which these expenses are incurred regardless of whether film is released in that year or not as held by the hon'ble Madras High Court in the case of CIT v. Prasad Productions P. Ltd. as reported in [1989] 179 ITR 147the cost of making positive prints is allowable under section 37 of the Act. Further in the case of B. Nagi Reddy v. CIT as reported in [1993] 199 ITR 451, the hon'ble Madras High Court held that any loss arising on account of feature film being abandoned midway without completing it, then, the expenditure incurred till that date including the payments made to artists, writers etc. would be allowable as a business loss on the principle of commercial expediency. All the above instances make it clear that in case of film producer, the expenses which do not form part of cost of production as per rule 9A are allowable as per the normal provisions of the Act. It, therefore, follows that rule 9A does not cover all these situations and all types of expenses, hence the proposition that it overrides the provisions of the Act on the face of it, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrictive provisions of section 37 of the Act. This view can further be substantiated by the fact that the Legislature has not given overriding effect to rule 9A by not framing the said rule as "Notwithstanding anything contained in any provisions of the Act and/or any other rule of the Income-tax Rules, 1962." Further, there is also no commercial/ business necessity, attached to film production which may justify the exemption to film producers from the applicability of the provisions of section 37(2A) and/or section 37(3) in respect of expenditure forming part of cost of production as per rule 9A." 28. In view of the above discussion and following the decision of Hon'ble Madras High Court in case of Prasad Productions Pvt. Ltd. as well as decision of the Coordinate Bench of this Tribunal in case of Mukta Arts (P.) Ltd. we hold that the expenditure incurred in respect of preparation of positive prints as well as advertisement and publicity are allowable. Accordingly the addition enhanced by the CIT(A) is deleted." Respectfully, following the above two orders of the Tribunal, we decide ground no.13 if favour of the assessee. 11. Next ground deals with ad hoc disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other adhoc disallowances, the Ld. CIT(A) took a similar view. XXXXXXXXX 28. We have considered the rival submissions, perused the orders of the lower authorities and the material evidence brought on record which is placed in the paper book. It is not in dispute that many junior artists are engaged in the making of a movie. The main artists in a movie are hardly 15 to 25 in numbers whereas the entire movie moves ahead on junior artists. It is also not in dispute that the supplier M/s. Pappu & Co., has confirmed to have made available junior artists to the assessee. It is also a fact that if the contractor i.e. Pappu & Co., could not furnish the full address of the Junior artists, the same cannot be used adversely against the assessee. Further, the Ld. CIT(A) has placed much reliance on the surrender of Rs. One crore from M/s. Pappu & Co., during the course of the survey operations. If the said contractor was not disclosing its income properly, that cannot be held against the assessee. On the contrary, it should support the case of the assessee that it has made payments to M/s. Pappu & Co., which in its turn has not shown its return of income as the entire payment to Junior arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in that the submission account at Rs. 12.81 crores in respect of movies Krish and Rs. 8.32 crores in respect of movie KANK, that the assessee failed to substantiate that the receipts of Rs. 9.95 crores were a part of total receipts credited to the distribution division. After obtaining explanation about the disputed amounts, the AO made an addition of Rs. 9.95 crores to the total income of the assessee. 12.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. Before him, it was argued that the amount in question was merely a receipt transfer between two divisions, that it was collected by distribution office and was partly transfer to the HO, that whenever the DD would receive money from the customer it would book the whole receipt and work out the night income in its books, that based on the gross collection it would transfer and appropriate amount to the HO, that the HO would show the amount in the particular movies account for the timing for the MIS purposes, that at the end of the movie it would be transferred to the distributor division's ledger account, that without appreciating the accounting system of the assessee the AO had added the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.91 crores + Rs. 8.34 crores + Rs. 9.95 crores. No incriminating document was found or impounded during the survey operation that could lead to the conclusion that the total revenue of these films was more than the income shown by the assessee in its regular books of accounts. In our opinion, the FAA had rightly observed that the AO had wrongly interpreted the transfer of funds from one division to another as profit of the company. Therefore, we hold that the order of the FAA does not suffer from any legal or factual infirmity. Confirming the same, we decide the first ground of appeal against the AO. 12.5. Second ground is extension of first ground and is general in nature. We are not adjudicating the same. 13. Third ground deals with addition made on account of print cost. During the assessment proceedings, the AO observed that the cost of print in respect of movie Dhoom-2 was shown at Rs. 4.28 crores against the expenses of Rs. 4.24 crores, that as per the details filed by the assessee it had credited the aggregate amount of Rs. 3.14 crores as the cost of print recovered, that the difference between the two amounts i.e. Rs. 1.10 crores (Rs. 4.24 crores (-) Rs. 3.14 crores) had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the FAA, it filed the remaining evidences, that the FAA called for remand report, that in the remand report the AO did not adversely comment about the authenticity of the evidences. The expenditure incurred by the assessee is a legitimate business expenditure and is allowable as per the provisions of the Act. As the assessee had failed, at the time of assessment, to fully support the claim made by it, so, the AO had rightly restricted the expenditure to Rs. 3.14crores. But, there was no justification in not allowing the remaining amount of Rs. 1.10 crores once the assessee had produced the necessary evidences. We are of the opinion that there is no infirmity in the order of the FAA. So, upholding his order, we dismiss third ground. 14. Fourth ground pertains to additions made under the head unaccounted receipts, amounting to Rs. 9.40lakhs. While deciding the ground no.5, filed by the assessee(paragraph 7-7.3)we have dealt the issue at length. The AO has challenged the order of the FAA, as he had given part relief. 14.1. We find that assessee had distributed a regional film, that after deducting publicity cost it paid the balance amount to the producer of the film, that it did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(ITA. SS/685/Mum/2002) had confirmed the fact that bungalow was used for purpose of business, that for the period under consideration the assessee was to be allowed depreciation. 16.2. The DR argued that there were change in facts as compared to last year, that the property was under repair, it was no longer an office even before renovation. The AR stated that survey was carried out in 2010, that the AO had allowed depreciation while completing assessment for AY.2009-10, u/s.143(3), that in the AY 2010-11 it was shown as residence of one of the directors. He referred to pg-23 of the PB. 16.3. We have heard the rival submissions and perused the material before us. We find that the survey was carried out during the AY.2010-11, that the assessee had claimed depreciation for the AY.under appeal, that on the basis of renovation work carried out in the year 2010 the issue of allowability of depreciation for earlier year should not have been decided. The AO had to consider the facts of the year under consideration. The FAA after considering the old records and the order of the Tribunal had given a finding of fact that the premises was being used as office premises in the year. Nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 9.23 lakhs, being 20% of Rs. 46.16 lakhs. During the assessment proceedings, the AO held that assessee had made certain cash payments in excess of Rs. 20,000/- on particular dates. After considering the submission of the assessee, the AO disallowed 1/5th of the total expenditure i.e. Rs. 46,16,540/- and made an addition of Rs. 9,23,308/-to its total income. 18.1. Before the FAA, the assessee stated that addition was made under a wrong impression by the AO that each item referred to a single cash payment, that none of the payment to a single person was more than Rs. 20,000, that the payments were only made an entry in the main book from each movie account, that each payment was less than Rs. 20,000/-for which all supporting documents were produced before the AO, that the unit going on an outdoor shoot prepared the excel sheet of each and every voucher of the expenditure, that all the vouchers for a particular day or week were consolidated and a single entry was passed in the accounting software, that the amount reflected in tally was for more than Rs. 20,000/-, that each voucher was less than Rs. 20, 000/-. 18.2. The FAA verified the vouchers and cashbook produced by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of Yash Raj films Private Limited, that it was just a mirror entry in the main book from Fanna account. After considering the available material, the FAA held that the argument of the assessee was based on books of accounts, that the company was maintaining production account of each movie, that same was margin the main account once the movie was released for the year was completed, that the addition was result of strong understanding of the book entries. He deleted the addition made by the AO. 19.2. The DR left the issue to the discretion of the Bench. The AR supported the order of the FAA. We find that the assessee was maintaining its books of accounts regularly and was following a peculiar system, that after completion of the movie the account of each movie was merged in the main account. The AO without understanding the system followed by the assessee had invoked the provisions of section 69C of the Act. In the circumstances we hold that the order of the FAA does not suffer from any legal infirmity. Ground number nine is dismissed. 20. Fluctuation of foreign currency loss is the subject matter of ground no.10. During the assessment proceedings, the AO found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that the cost pertained to the year under consideration, even if it was work in progress it could not be treated as a capital expenditure. 20.3. We have heard the rival submissions and perused the material. We find that the FAA has given a categorical finding of fact that the foreign exchange fluctuation loss related to expired contracts. Nothing was brought over notice to prove otherwise. Therefore, we see no need to interfere with the order of the FAA because he has followed the provisions of rule 115 of the rules and the mandate of AS-11. Confirming his order, we dismiss GOA 10. 21. Next ground is about disallowance u/s.40(a)(i)of the Act. During the assessment proceedings the AO found that assessee had made payments to certain parties without deducting tax at source. He directed the assessee to file explanation about such payments. He held that impounded books of accounts revealed that expenses were incurred towards the processing and printing charges, that the provisions of section 194C were applicable with regard to the assessing charges/print processing charges, that the assessee did not produce the purchase bills in support of its claim that above-mentioned payments inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appeal, that he had allowed the benefit to the assessee even though he was not sure about the facts. The AR relied upon the order of the FAA. 21.3. We find that the FAA had partly allowed the appeal of the assessee, that it had directed the AO to make verification about the rates of deducting tax at source and to allow the expenses only after verification. In our opinion, the order of the FAA does not suffer from any infirmity. Confirming the same, we dismiss the ground raised by the AO. 22. Last ground deals with disallowance of expenses on credit cards. During the assessment proceedings, the AO found that assessee had made payment to Reliance Energy Ltd in respect of bungalow of Y.R. Chopra, entertainment expenses, fees/subscription, insurance expenses, office expenses towards furniture gifts food and refreshments by using credit cards. He observed that assessee had failed to substantiate that the expenses were incurred for carrying on the business activity, that it failed to produce any evidence which could show that expenses were not incurred for entertaining the members of the family, that expenses to the tune of Rs. 46.81 lakhs were not incurred wholly and exclusivel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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