Income Tax Appellate Tribunal - Mumbai
Mega Bollywood P. Ltd., Mumbai vs Assessee on 3 November, 2006
1
ITA No. 726/Mum/2007
Asstt.Year : 2003-2004.
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "B", MUMBAI
Before Shri N.V. Vasudeval, Judicial Member and
Shri J. Sudhakar Reddy, Accountant Member
I.T.A. No. 726/Mum/2007.
Assessment year : 2003-04
Mega Bollywood Pvt. Ltd., Dy. Commissioner of Income-tax,
5-C, Swapnalok, Vs. Central Circle-24, Mumbai.
L.Jagmohandas Marg,
Mumbai - 400 006.
PAN : AAACY0507D
Appellant. Respondent.
Appellant by : Shri Vijay Kumar S. Biyani.
Respondent by : Shri Hari Govind Singh.
ORDER
Per J. Sudhakar Reddy, A.M. :
This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-IV, Mumbai dated 03-11-2006.
2. The assessee is in the business of film production and film finance and acts as world right controller of films, produced by others. The AO disallowed the claim of expenditure of Rs.75,35,320/- incurred, by the assessee in defending Shri Bharat Shah against criminal proceedings. At para 4, the AO held as follows:
"Expenditure of Rs.75,35,310/- incurred on defending Shri Bharat Shah, against criminal proceedings :
This issue has been discussed in detail in the assessment order for the AY 2002-03 wherein the expenditure for defending partners in criminal proceedings is disallowed. The circumstances are identical on this year also.2 ITA No. 726/Mum/2007 Asstt.Year : 2003-2004.
The assessee's arguments are also like last year. Since the issue has been decided in AY 2002-03 and there is no change in the circumstances, the amount of Rs.75,35,310/- is disallowed and added to the total income."
Aggrieved, the assessee carried the matter in appeal. The first appellate authority upheld the disallowing by holding as follows :
"10. In view of the facts of the case, as discussed above, the claim of the appellant for allowing of the expenditure of Rs.7535320/-, as a business expenditure, fails on the most basic ground ie. It has not been expended wholly, exclusively and necessarily for the purpose of the business of the appellant. It is in fact shocking to note that the appellant has blatantly sought to make a case, seeking deduction of an expenditure, which is clearly not a permissible deduction under the framework of the Income Tax Act, 1961. I find immense merit in the conclusion of the AO that the expenditure was incurred by the appellant on defending the criminal charges levied against Shri Bharat Shah and others in their individual capacity. The said expenditure incurred was also not in respect of a transaction which arose out of and was incidental to the appellant's own business. The criminal charges levelld in the impugned MCOCA case, were not against the appellant, but were against certain individuals. These charges have categorically arisen independent of the business activity of the appellant and are not incidental to any transaction entered into by the appellant. The AO is right in stating that the criminal charges defended, are on certain individuals, with whom the appellant has a business transaction, but that cannot justify the allowability of the expenditure incurred.
11. The appellant has relied on various case laws. Unfortunately none of these case laws come to any help to the appellant because in none of the judicial pronouncements any proposition has been laid down that a deduction u/s 37(1) of the I.T. Act is allowable for defending a case of some other individual who has been accused in criminal conspiracy.
12. In view of the foregoing, I uphold the decision of the AO and hold that the sum of Rs.755535320/-, spent by the appellant in defending Bharat Shah and others, against criminal charges under the MCOC 3 ITA No. 726/Mum/2007 Asstt.Year : 2003-2004. Act, for serious criminal offences is not an allowable business expenditure."
Aggrieved, the assessee is in appeal.
3. We have heard Mr. Vijay Kumar S. Biyani, learned counsel for the assessee and Mr. Hari Govind Singh, the learned DR.
4. The learned counsel for the assessee was fair enough to submit that the C- Bench of the Tribunal in the assessee's own case for the earlier assessment year 2002-03 in ITA No. 2506/Mum/2006, order dated 15th Feb., 2010, has held in favour of the Revenue on the very same issue. Nevertheless he submitted that, as the AO and the CIT(Appeals) have not examined the details of the expenditure, the issue may be set aside for fresh adjudication.
5. The learned DR opposed these contentions and submitted that the case has been discussed in detail before the CIT(Appeals).
6. At para 8, the CIT(Appeals) has clearly held as follows :
"8. It is an undisputed fact that :-
a. The appellant was not an accused under the said suit and the expenditure of Rs.7535320/- was therefore not incurred in its defence.
b. The serious criminal offence was committed by Mr. Bharat Shah in his individual capacity and the appellant has spent money in his defence, and has thus incurred the expenditure of Rs.7535320/-. c. While not relevant to the case here, it is worth noting that Mr. Bharat Shah was found guilty under the IPC and was sentenced to one year rigorous imprisonment too. All the criminal charges are against Mr. Bharat Shah and it is outlandish to even think that the sum of Rs.7535320/- spent by the appellant was for its own business purpose. The crime was committed by and the criminal charges were levied against Mr. Bharat Shah and the amount of 4 ITA No. 726/Mum/2007 Asstt.Year : 2003-2004. Rs.75.35 lacs was spent in defending the accused in the case, which certainly did not include the appellant, as is clear from the impugned order."
In view of the specific finding and in view of the fact that the assessee has not brought any thing on record, to point out that this amount of Rs.75,35,320/- consists of payments made for certain other purposes, than defending Mr. Bharat Shah in criminal charges, we find no merit in the submission of the assessee that the matter should be set aside for fresh adjudication. We respectfully follow the decision of the coordinate bench in the assessee's own case for the earlier assessment year and uphold the order of the first appellate authority.
7. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 25th February , 2011.
Sd/- Sd/-
(N.V. Vasudevan) (J. Sudhakar Reddy)
Judicial Member. Accountant Member
Mumbai,
Dated: 25th February, 2011.
Wakode
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ITA No. 726/Mum/2007
Asstt.Year : 2003-2004.
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, B-Bench
(True copy)
By Order
Asstt. Registrar,
ITAT, Mumbai.