9911796707
TMI Blog2023 (11) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... FOR THAT on a true and proper interpretation of the scope of the provisions of s. 40A(3) of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-1, Hyderabad was absolutely in error in upholding the specious addition of Rs. 3,14,00,000/- resorted to by the Ld. Assistant Commissioner of Income Tax, Circle 4(1), Hyderabad without considering the facts and circumstances in the light of Rule 6DD(k) of the Income Tax Rules, 1962 and such spurious conclusion derived from extraneous considerations not germane to the issue in dispute is totally arbitrary, unwarranted and perverse. 3. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-1, Hyderabad acted unlawfully in upholding the tenuous addition amounting to Rs. 3,14,00,000/ -, being the expenses incurred on account of part consideration of purchase, made by the Ld. Assistant Commissioner of Income Tax, Circle 4(1), Hyderabad by an erroneous application of the provisions of s. 40A(3) of the Income Tax Act, 1961 read with Rule 6DD(k) of the Income Tax Rules, 1962 and the adverse finding reached on such unconnected parameters not amenable to reason is wholly illegal, illegitimate and infirm in law. 4. FOR THAT the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovie producers by cheque and given all the particulars in a tabular form. Thereafter, the ld. AR submitted that as the movie industry is volatile, assessee has to purchase / sell satellite rights only in cash and that the same is evident from the agreements entered into by the assessee with various vendors and further contended that the sellers insist the assessee to make payment in cash and then he drew our attention to the agreements entered into by the assessee with various parties for purchasing and selling of movie satellite rights. 6.1. Ld. AR further submitted that the Assessing Officer has not considered the alleged agreements and totally ignored the commercial expediency of the assessee and thereby made an addition of Rs. 5,90,00,000/- which was showed towards movie satellite rights under the head "Purchases" in the profit and loss account ignoring the fact that payment of Rs. 2,11,00,000/- by the vendors of the assessee directly to the labs and Rs. 65,00,000/- by the assessee through banking channels and not by way of cash. In fact, assessee had paid Rs. 3,14,00,000/- only by way of cash and hence, the Assessing Officer had made error by disallowing the entire amount wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad captured that the amount of Rs. 3.14 crore was paid in cash by the assessee to the sellers for movie rights after receiving it from the following four parties: Sl. No. Seller Cash paid 1 Sudha Cinema 95,00,000/- 2 Lucky Media 80,00,000/- 3 Vanitha's Dream Line 79,00,000/- 4 Hanu Cine Creation 60,00,000/- Total 3,14,00,000 The assessee had also placed on record the signed copy of the agreement entered by the assessee with M/s. Sudha Cinema and others to the Assessing Officer / ld.CIT(A). The agreement with the purchaser and the cash payment made by the assessee after receiving it from the purchaser to the seller are not disputed by the revenue authorities. Thus, the genuineness of the transactions has not been doubted by the revenue authorities. In fact, the amount of Rs. 3,14,00,000/- was paid by the assessee after receiving it from M/s. Sudha Cinema and others in his individual capacity. In our view, once the genuineness of the cash payment for purchasing the movie rights have been considered by the revenue authority with respect to the other transaction namely, for the other part of the amount which was paid through the banking channel for an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect an order of remit was passed by the tribunal and no addition or adverse observation was made by the Assessing Officer. These were relevant and material aspects which were required to be considered and examined by the tribunal but have been overlooked. Keeping in view the quantum of the total amount, we were initially inclined to remit the matter. However, looking at the averments made, the assessment years in question and explanation given, we refrain from issuing the said direction and accept the contention of the appellant. 2. Similarly in Honey Enterprises Vs. CIT, Delhi reported in (2016) 65 taxmann.com 35 (Delhi), the Hon'ble High Court has observed as under : "31. Rule 6DD of the Rules expressly provides that no disallowance under Sub-section 3 of Section 40A shall be made, inter alia, in circumstances specified thereunder. Clause (j) of Rule 6DD of the Rules (as applicable during the relevant assessment years) expressly provided that no disallowance under Section 40A(3) of the Act would be made in cases where the Assessee furnishes evidence to the satisfaction of the Income-tax Officer as to the genuineness of the payment and the identity of the payee. And, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent circumstances neither the genuineness of the payment nor the identity of the payee is disputed. The only controversy that needs to be addressed is whether the ITAT's decision that such payments had been made by the Assessee on account of business exigencies is perverse. 36. In the present case, the AO does not dispute that the Assessee carried on its business in Delhi and its officers had to travel to Bombay to negotiate the purchase of distribution rights. The Assessee had also contended that such payments were made as the producers required the payments urgently at various sites where films being produced by them were being shot and it was expected that such payments be made in cash in the normal course of conducting business. 37. In our view, the question whether the Assessee's business exigencies required payments to be made in cash, is a question of fact. The ITAT has returned a finding in favour of the Assessee and it is not possible to conclude that such finding is without any basis or any material on record. The ITAT's decision, thus, cannot be held to be perverse. Accordingly, the question of law is answered in favour of the Assessee and against the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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