Income Tax Appellate Tribunal - Chennai
Ibrahim Rowther, Chennai vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, CHENNAI
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
ITA No.1923 & 1924/Mds/2012
Asst. Years : 2006-07 & 2007-08
Shri IBRAHIM RAWTHAR, The Income Tax Officer,
No.149, Jawaharlal Nehru Salai, Media Ward - III,
Arumbakkam, CHENNAI-600 106. v. CHENNAI.
PAN : AAAPI4192B.
(Appellant) (Respondent)
Appellant by : Mr. R. Padmanabhan, CA
Respondent by : Mr. Shaji P. Jacob, Addl.CIT
Date of hearing : 07 Mar 2013
Date of Pronouncement : 15 Mar 2013
O R D E R
PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER :
These are the appeals filed by the assessee against separate orders of Commissioner of Income Tax (Appeals)-VI, Chennai, dated 25.6.2012 for the Asst. Years 2006-07 and 2007-08. Since both these appeals pertain to the same assessee , these 2 ITA 1923,1924/Mds/12 appeals are clubbed and heard together and disposed off by this common consolidated order for the sake of convenience.
2. ITA No.1923/Mds/2012, A.Y. 2006-07 : The first issue in the grounds of appeal of the assessee is that the reopening of assessment under sec.147 of the I.T. Act is erroneous and the assessee was not provided with reasons for reopening of the assessment.
3. The Counsel for the Assessee submits that reopening of assessment under sec.147 of the I.T. Act is erroneous and no notice and reasons recorded for reopening of assessment was provided to the assessee.
4. The Departmental Representative submits that the assessee never requested for any reasons for reopening of the assessment nor agitated before the Commissioner of Income Tax (Appeals) that the assessment was erroneous and bad in law.
5. On a perusal of the records we find that the assessee did not contend before the Commissioner of Income Tax (Appeals) that the assessee was not provided with reasons recorded for reopening 3 ITA 1923,1924/Mds/12 of assessment and, therefore, the assessment is bad in law. No such arguments were advanced before the Commissioner of Income Tax (Appeals). It was also not the case of the assessee that the assessment was completed originally under sec.143(3) of the Act and the assessment was reopened beyond four years and, therefore, is bad in law. In the circumstances, we reject the grounds raised by the assessee on reopening of assessment under sec.147 of the I.T. Act.
6. The next issue in the grounds of appeal of the assessee is that the Assessing Officer erred in rejecting the claim of assessee in a sum of .35,00,000/- assessable over a period of ten years on the basis of agreement entered into with M/s. Mavis Satcom Limitedby the assessee for 18 cinematography films.
7. At the time of hearing the Departmental Representative submits that on identical facts, this Tribunal considered the issue in assessee's own case in ITA No.2067/Mds/2008 for the Asst. Year 2005-06. He submits that this Tribunal upheld the decision of Commissioner of Income Tax (Appeals) in holding that the amounts 4 ITA 1923,1924/Mds/12 received by the assessee from M/s. Mavis Satcom Limited for assignment of copy rights of transmission including satellite telecast of 18 films for a period of ten years from the date of agreement has to be assessed only after rendering specific performance of the agreement by the assessee ie., handing over confirmed laboratory letters and the copy of negative/positive prints of the films. The Departmental Representative, further, submits that the addition of .35 lakhs made in the assessment represents part of consideration received in pursuant to the contract entered into by the assessee with M/s. Mavis Satcom Limited in earlier Asst. Year 2005-06 where the issue was decided by the ITAT.
8. We have heard both sides. Perused the materials on record and the orders of authorities below. The Commissioner of Income Tax (Appeals), while confirming the addition observed as under :-
"4. Ground Nos. 1 to 4 deal with addition of .35,00,000/-. The appellant entered into an agreement on 01.10.2004 with M/s. Mavis Satcom Ltd. for assignment of copyright of 18 5 ITA 1923,1924/Mds/12 cinematograph films produced by the appellant under three different banners (of which he was the proprietor) for transmission through Indian satellite system for a period of 10 years from the date of agreement for consideration of RS.1.20 crores. The appellant received Rs.20,OO,OOOj- during FY 2004-05 and offered the same in the return of income for AY 2006-07. A part payment was received during the FY 2005-06 of Rs.35,OO,OOOj-. Earlier the AO taxed the entire consideration of RS.1.20 crores in the AY 2005-06 on the ground that agreement was signed during FY 2004-05 and hence the whole amount is taxable in the year. The order was reversed by CIT(A) and confirmed by ITAT vide order dated 16.09.2009. Consequently the AO brought to tax Rs.35,OO,OOOj- received during the year as income of the appellant for the relevant AY on receipt basis which was proposed to be offered to tax on deferred basis over a period of several years by the appellant. The AO justified taxing Rs.35,OO,OOO/- during the year on the ground that the appellant has rendered specific performance of the agreement (namely the handing over to the assignee the duly confirmed laboratory letters from the concerned laboratories) and payments have been received, the appellant failed to furnish the dates on which letters from laboratories were handed over. The AO also cited from the order of Hon'bJe ITAT dated 28.08.2009 wherein the AR argued for taxing the receipts in the subsequent year to justify bringing to tax the said receipt in FY 2005-06. The AO also held that the stand of the appellant to spreading the receipts over a period of several years in future till AY 2016-17 is only an afterthought to defer the tax liability and therefore brought to tax the said amount on both the principles of accrual and receipt.
4.1 The appellant objected to taxing Rs.35,OO,OOOj- which has been reproduced in para 3.6 of the - assessment order. I have 6 ITA 1923,1924/Mds/12 carefully considered the basis adopted by the AO (para 3.7 of the assessment order) to bring to tax Rs.35,OO,OOO/-. The appellant has received the said amount c:Jring the relevant FY as part consideration for assignment of copyright of 18 cinematograph films. In view of the judgement of Hon'ble ITAT in the appellant's case on this issue the said amount which was taxed in AY 2005-06 being the. date of signing the agreement becomes taxable in the year in which the appellant handed over to M/s. Mavis Satcom Ltd. duly confirmed laboratory letters relating to the films. Therefore both from the principle of accrual and receipt the said amount is required to be taxed in the relevant fY and the AO has recently brought to tax the said amount. Hence these grounds of appeal are dismissed as not maintainable.
On going through the order of Commissioner of Income Tax (Appeals), we find that the Commissioner of Income Tax (Appeals), following the order of this Tribunal, sustained the addition made by the Assessing Officer. We have also perused the order of this Tribunal dated 28.8.2009 in ITA No.2067/Mds/2008, wherein this Tribunal held as under :-
"5. We have considered the rival contentions and the relevant records. It is an undisputed fact that the assessee received only .20,00,000/- as token amount during the period relevant to the assessment year under consideration and the balance amount was payable only after fulfilment of the conditions as prescribed in the 7 ITA 1923,1924/Mds/12 agreement entered into by the parties. When the transactions of the assignment of telecast rights of the films was subject to the terms and conditions of the agreement and the assessee was entitled to receive the amount, only after the performance of his part of the agreement. It is also an undisputed fact that the assessee received the balance amount only after handing over the confirmed laboratory letters and the copy of the negative / positive prints of the films and the same was only in the subsequent years. During the course of the arguments, the learned Authorized Representative of the assessee has submitted that the assessee is ready to offer the entire consideration of . 1,20,00,000/- for tax in the assessment year 2007 - 2008 because the assessee received the balance amount of .35,00,000/- in the year 2005 and . 65,00,000/- in the year 2006. In view of the above, we find that the said amount did not accrue to the assessee during the period relevant to the assessment year under consideration and the same will accrue only when the assessee completed the conditions as per the agreement and became entitled to receive the balance amount. Accordingly, we find no error or illegality in the order of the Commissioner of Income Tax(Appeals), qua this issue and the same is upheld."
9. In view of the order of this Tribunal holding that when the transaction of the assignment of telecast rights of the films was subject to terms and conditions of the agreement and the assessee was entitled to receive the amount only after the performance of his 8 ITA 1923,1924/Mds/12 part of the agreement, the decision of the Commissioner of Income Tax (Appeals) in holding that the assessee received the said amount of .35 lakhs during the Financial Year 2005-06 relevant to Asst. Year 2006-07 as part consideration for assignment of copy right of 18 cinematography films shall have to be taxed in the year in which the assessee handed over laboratory letters and copy of negative/positive prints to M/s. Malvis Satcom Limited, is in conformity with the decision of this Tribunal. Therefore, we find no good reason to interfere with the decision of the Commissioner of Income Tax (Appeals) and we up hold the order of Commissioner of Income Tax (Appeals) on this issue.
10. The next issue in the grounds of appeal of the assessee is with regard to addition made towards improvement charges.
11. The Assessing Officer, while completing the assessment rejected the claim of the assessee to consider .11,35,830/- as cost of improvement for the lands purchased by the assessee at Paruthipattu village and Kattupakkam village on the ground that the assessee could not substantiate with documentary evidence that he 9 ITA 1923,1924/Mds/12 has incurred cost of improvement for the said lands. On appeal, the Commissioner of Income Tax (Appeals) confirmed the said rejection of assessee's claim made by the Assessing Officer.
12. The Counsel for the Assessee submits that the assessee had incurred .4,77,830/- and .7,58,000/- towards cost of improvement for the lands situated at Paruthipattu and Kattupakkam villages respectively and, therefore, the said cost of improvement has to be considered as sale consideration in computing capital gains.
13. The Departmental Representative submits that no documentary evidence is furnished by the assessee to prove that the said amounts were incurred towards cost of improvement.
14. We have heard both sides. Perused the materials on record and the orders of authorities below. The Assessing Officer rejected the claim of the assessee for want of documentary evidence to establish that the assessee had incurred these expenses of .4,77,830/- and .7,58,000/- aggregating .11,35,830/- towards cost of improvement for the lands sold by the assessee at Paruthipattu and Kattupakkam villages respectively. The 10 ITA 1923,1924/Mds/12 Commissioner of Income Tax (Appeals) confirmed the said action of the Assessing Officer holding as under :-
"5. Ground no.5 to 7 deals with disallowance of improvement charges of Rs.l1,35,830/-. The appellant sold lands at Paruthipattu and Kattupakkarn villaqes and claimed cost of improvement of Rs.4,77,830/- and Rs.7,58,000/- aggregating to Rs.ll,35,830j-. The AR vide letter 29.12.2009 submitted the details. before the AO which on examination was found to be vague and .general, no documentary evidence for the claim was produced, verification of asset side of the balance sheet for AY 2005-06 did not show any land development and hence the AO drew inference that the lands sold were only a vacant land. The appellant in the grounds of appeal objected to the disallowance by submitting that the' AO has not given any valid reasons for the disallowance. However, I find that the AO has made the said disallowance after clearly recording the finding that the appellant did not substantiate the claim with verifiable evidence and hence I confirm the dis- allowance on these grounds. These grounds of appeal are dismissed. "
On going through the order of Commissioner of Income Tax (Appeals), we find that no good reason exists to interfere with the order of the Commissioner of Income Tax (Appeals) in rejecting the claim of the assessee, especially when there is no documentary evidence produced by the assessee in support of his claim that he 11 ITA 1923,1924/Mds/12 has incurred such expenditure towards cost of improvement of land. Hence the order of the Commissioner of Income Tax (Appeals) is affirmed.
15. The last issue in the grounds of appeal is against charging of interest under sec.234A,B&C of the I.T. Act. Since charging of interest under sec.234A,B&C are mandatory and only consequential, we reject the grounds of appeal of the assessee on this issue.
16. In the result, the appeal of the assessee is dismissed. ITA No.1924/Mds/2012, A.Y. 2007-08 : The assessee has raised the following grounds :-
1. Addition of .65,00,000/- The Learned CIT(A) erred in following the very same reasons existed in the Asst. Year 2006-07 for disallowance is erroneous.
The learned Assessing Officer has erred in rejecting the claim of appellant that a sum of .65,00,000/- is assessable over a period of ten years on the basis of the agreement for 18 cinematography films.
12
ITA 1923,1924/Mds/12
2. Bad Debts of .17,77,261/-. : The bad debts of .17,77,261/- is relating to business and as such admissible as deduction while computing the total income.
3. Claim of Donation of .5000/-. The claim is legally allowable.
4. Enhancement of .3889/- : Enhancement of House Property .3889/- is not correct and proper.
5. Charging of interest u/s.234A,B and C: The charging of interest u/s.234A,B and C is not correct and proper.
17. With regard to Ground No.1 above, following our detailed discussions and reasons for dismissing similar ground taken by the assessee for the Asst. Year 2006-07, we dismiss this ground of appeal for this Asst. Year also ie., Asst. Year 2007-08 as the facts being same for both the Asst. years.
18. The brief facts concerning Ground No.2 with regard to Bad Debts of .17,77,261/-, the Assessing Officer disallowed the claim of Bad Debts of .17,77,261/- made by the assessee on the ground that the assessee did not offer the said amount as income in 13 ITA 1923,1924/Mds/12 earlier years and, therefore, the assessee did not comply with the provisions of sec.36(1)(vi) of the I.T. Act. On appeal, the Commissioner of Income Tax (Appeals) affirmed the order of Assessing Officer.
19. The Counsel for the Assessee relied on the grounds of appeal.
20. The Departmental Representative supported the orders of Commissioner of Income Tax (Appeals).
21. We have heard both sides. Perused the materials on record and the orders of authorities below. The Commissioner of Income Tax (Appeals), while affirming the order of the Assessing Officer in disallowing the claim for bad debts held as under :-
"5. Ground Nos.5 to 7 deals with disallowance of bad debts. The appellant paid .10 lakhs to Tamil Ponni Arts for purchase of right for film "Oru Nanbanin Kathai" as the film was not censored the project was dropped and the producer became bankrupt and the appellant could not recover the same and hence the same was claimed as bad debt. The A.O. disallowed the claim on the ground that the amount was not offered as income in the earlier years u/s.36(1)(vi). Similarly the claim of bad debt of .7 lakhs paid 14 ITA 1923,1924/Mds/12 towards purchase right for the area of Karnataka for the film "Annan Ennada Thambi Ennada" which could not be recovered was also disallowed for the same reason. The appellant claimed that the said claim is admissible according to law. I find that the appellant has not offered the said amount as income in the earlier years and hence the A.O has correctly disallowed the claim for non-fulfilling the conditions laid down in Section 36(1)(vi) and I confirm the disallowance. This ground of appeal is dismissed."
On going through the order of Commissioner of Income Tax (Appeals), we find that there is no good reason to interfere with the order of Commissioner of Income Tax (Appeals) rejecting the claim of the assessee, especially when the assessee did not comply with the provisions of sec.,36(1)(vi) of the Act. Even at this stage, the assessee did not prove that these debts have become bad and the provisions of sec.36(1)(vi) were complied with by the assessee. Therefore, we confirm the order of the Commissioner of Income Tax (Appeals).
22. With regard to the issues in Ground Nos.3 & 4, we find that these issues were not raised before the Commissioner of Income Tax (Appeals). Therefore, since these issues are not emanating from 15 ITA 1923,1924/Mds/12 the order of Commissioner of Income Tax (Appeals), we reject these grounds of appeal as not maintainable.
23. The last issue is with regard to Charging of interest u/s.234A,B and C of the I.T. Act. Since charging of interest under sec.234A,B&C are mandatory and only consequential, we reject the grounds of appeal of the assessee on this issue.
24. In the result, both the appeals of the assessee are dismissed.
25. Order pronounced on Friday, the 15th day of March 2013, at Chennai.
Sd/- Sd/-
( N.S. SAINI ) (CHALLA NAGENDRA PRASAD)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Chennai,
Dated : 15th March 2013.
Jls.
Copy to:- (1) Appellant
(2) Respondent, (3) CIT(A), (4) CIT.,
(5) D.R., (6) G. File.