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TMI Blog2017 (3) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... posits of Rs. 1,04,60,798/-; b. Disallowance of interest on investment in residential building at Ramoji Film City of Rs. 2,03,04,932/-; c. Disallowance of advance to technicians written off at Rs. 3,20,73,859/- and d. Disallowance of expenditure incurred towards production cost of feature film - 'In the shadow of Cobra' Rs. 10,84,00,000/-; 3. Ld.CIT(A) in appeal has confirmed the above, hence the present appeal. 4. Ground No. 2 is as under: "2. The learned Appellate Commissioner erred in sustaining the disallowance of interest of the extent of Rs. 1,04,60,798/- by holding that the borrowing of money and the investment of the same in share application deposit does not constitute business activity. The learned Appellate Commissioner ought to have held that the said amount of interest expenditure was allowable and deleted the addition made by the Assessing Officer". 4.1. This issue pertains to disallowance of interest pertaining to borrowings for share application money. This issue arose in earlier year and AO and CIT(A) followed the orders in earlier years. Ld. Counsel fairly admitted that assessee withdrew the ground in AY. 2007-08 and referred to pg. 37 in appeal No. 1507 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect and out of Rs. 29 Crores investment, Rs. 18 Crores was made out of own funds. However, during appeal proceedings, the appellant could not bring any evidence to prove its point. The onus lay squarely on the appellant to state clearly the amount of interest it had claimed with respect to the aforementioned property. This simple detail was not provided by the appellant. Accordingly, given the facts and circumstances, the Assessing Officer is directed to verify the exact amount of interest claimed by the appellant with respect to the residential building at Ramoji Film City and disallow the same". 4.3.1 Since the issue involved is identical, the decision as outlined in the aforementioned case vide my order dated 03.09.2010 also applies to the current case. In other words, the Assessing Officer correctly disallowed the interest. However, the Assessing Officer is directed to verify the exact amount of interest claimed by the appellant with respect to the residential building at Ramoji Film City and disallow the same". 5.3. Ld. Counsel fairly admitted that this issue is held against in AY. 2005-06 onwards and referred the order of ITAT in ITA No. 1087/Hyd/2010 dt. 20-02-2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave given weight to the contemporaneous evidence. (c) In respect of the advance amount of Rs. 2,20,00,000/- the learned CIT(A) is not justified in rejecting the evidence produced by way of a contemporaneous letter written by Sri Rajkumar Santosh to whom it was paid. The letter confirms the payments and also the fact of efforts made for production of the Film MAHABHARAT. The learned CIT(A) has misquoted the crucial sentence by placing OBLIQUE SIGN in between 'was paid' and was 'was due' whereas the letter does not have such sign. He thus misled himself into believing that the payment of Rs. 2,20,00,000/- was not proved. (d) The learned CIT(A) and the Add. CIT have failed to appreciate that the expenditure of Rs. 17,51,347/- incurred through imprest account was duly vouched and accounted for by cashier in conformity with principles of accounting of imprest amounts. (e) The learned CIT(A) is not justified in holding that the advance payments of Rs. 77,67,290/- out of which Rs. 69.37 lakhs were made through cheques, was not proved. (f) The learned CIT(A) is not justified in holding that the expenses of Rs.l,21,153/- by way of cash and Rs. 4,34,069/- by way of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of the 11 productions claimed by the appellant, the major amount pertains to the production 'Mahabharat' for Rs. 2,43,07,171/- and this amount was stated to have been advanced to Sri Rajkumar Santoshi, a Director. When asked for the details of payments and confirmation from Sri Santoshi, it was replied by the appellant that Sri Santoshi had passed away and confirmation from him is not possible. As a last resort, the Assessing Officer asked to furnish the details of cheques and bank account details, through which the said amount was paid, For this, the appellant stated produced a bank statement for the period 2000 to 2012 and from this bank account, the Assessing Officer could not get any of the payments claimed to have been paid to Sri Santoshi. For this, the appellant claimed that the Bank had changed its software and needs time for furnishing of full particulars. Accordingly, the Assessing Officer granted some more time on two occasions. However, the appellant had not produced anything further before the Assessing Officer. As such, the Assessing Officer concluded that the claim of payment of Rs. 2.20 crores to Sri Santoshi and the total claim of advances to technician ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the disallowance by the Assessing Officer, the same are similar to the issue of advances. No evidences were purportedly produced by the appellant during assessment stage. On this issue also, during appeal proceedings, the appellant came up with some evidences and the same were forwarded to the Assessing Officer for her comments. The Assessing Officer had furnished her remand report stating that the bills / vouchers are self made and no credence can be given to such material. During remand stage, the appellant also failed to produce the bank account evidencing payment of any the amounts incurred in India and in particular the amount of Rs. 5.98 crores to Frank T. Demartini, through whom all the payments were claimed to have been made to foreign technicians. However, after receipt of remand report, the appellant filed a letter from the bank confirming that on request of M/s Usha Kiron Movies International, the bank paid amounts of Rs. 5,98,83,397/- to Frank T. Demartini. However, the nature of payment and the purpose for which these amounts were paid could not be made out from this confirmation. In the absence of any clinching evidences that the appellant had actually incurred th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shadow of Cobra'. He referred to the schedules in earlier years to submit that the expenditure on production work was recorded in earlier year and was part of the record. 10. Ld. Counsel made reference to legal principles in allowing the expenditure claim either as revenue expenditure or loss or bad debt. It was explained that Rule 9A was not applicable as the film certification was not obtained and referred to Circular No. 16/2015. He took support from the decision of the Hon'ble Bombay High Court in the case of M/s. Venus Records and Tapes P. Ltd., dt. 29-01-2015 (ITA No. 310 of 2013) for the proposition that cost of abandoned film written-off is a revenue expenditure. He also referred to the Co-ordinate Bench decision in the case of ITO Vs. Abdul G. Nadiadwala [29 ITR (Trib) 528] (ITAT, Mumbai) 'A' Bench for the same. He also submitted that was non-production of vouchers should not be taken adversely, when assessee is able to justify the payments by other evidence. 10.1. Ld. DR, however, relied on the detailed orders of the AO and CIT(A). 11. We have considered the rival contentions and perused the orders and Paper Book placed on record. As far as the expenditure of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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