Income Tax Appellate Tribunal - Mumbai
Hrithik Roshan , Mumbai vs Jcit Rg 16(1), Mumbai on 18 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"H" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI N.K. PRADHAN, ACCOUNTANT MEMBER
ITA no.1250/Mum./2015
(Assessment Year : 2011-12)
Shri Hrithik Roshan
B-27, Commerce Centre
Off New Link Road ................ Appellant
Andheri (W), Mumbai 400 053
PAN - AABPN2790F
v/s
Jt. Commissioner of Income Tax
Range-11(1), Aayakar Bhawan ................ Respondent
101, M.K. Road, Mumbai 400 020
ITA no.1512/Mum./2015
(Assessment Year : 2011-12)
Asstt. Commissioner of Income Tax
Range-16(1), Aayakar Bhawan ................ Appellant
101, M.K. Road, Mumbai 400 020
v/s
Shri Hrithik Roshan
B-27, Commerce Centre
Off New Link Road ................ Respondent
Andheri (W), Mumbai 400 053
PAN - AABPN2790F
Assessee by : Shri R. Prasad Rao
Revenue by : Shri J.P. Jangid
Date of Hearing - 31.10.2016 Date of Order - 18.11.2016
2
Shri Hrithik Roshan
ORDER
PER SAKTIJIT DEY, J.M.
These cross appeals are directed against the order dated 24th December 2014, passed by the learned Commissioner (Appeals)-4, Mumbai, for the assessment year 2011-12.
ITA no.1250/Mum./2015 - Assessee's Appeal
2. Ground no.1, corresponding to grounds no.2 and 3 of Department's appeal in ITA no.1512/Mum./2015, is in relation to the direction of the learned Commissioner (Appeals) on the issue of estimation of ALV of the house property.
3. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee had two immovable properties at 4th and 5th floor of Lotus Business Park, but assessee has not offered any income therefrom on the reasoning that it was vacant for the whole year. Therefore, he proposed to assess the notional value of the property. Though, the assessee objected to the proposed determination of the house property income notionally, however, the Assessing Officer rejecting the objection of the assessee proceeded to estimate the ALV of the property by applying the rate of 7% of the value of the properties shown in the Balance Sheet which resulted in determination of annual value of ` 96,90,944 and ` 68,83,202 in 3 Shri Hrithik Roshan respect of two properties. Being aggrieved of the addition made on determination of ALV as above, assessee preferred appeal before the learned Commissioner (Appeals).
4. The learned Commissioner (Appeals), after considering the submissions of the assessee, though, rejected assessee's claim of nil ALV on the plea of vacancy of the flats during the relevant period, however, he also disapproved of the Assessing Officer's action in estimating the ALV @ 7% of the value shown in the balance sheet. The learned Commissioner (Appeals) following the decision of the Hon'ble Jurisdictional High Court in CIT v/s Tip Top Typgraphy, in ITA no.1213 of 2011, dated 8th August 2014, directed the Assessing Officer to fix the standard rant in terms of Maharashtra Rent Control Act, 1999, if the same is applicable, or, leave it to the parties to get it determined by the Court or Tribunal under the Maharashtra Rent Control Act, 1999.
5. Learned Authorised Representative submitted, the Assessing Officer may be directed to implement the order of the first appellate authority.
6. Learned Departmental Representative relied upon the order of the Assessing Officer.
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Shri Hrithik Roshan
7. Having considered the submissions of the parties and perused the materials on record, we do not find any infirmity in the order of the learned Commissioner (Appeals). Undisputedly, the Assessing Officer has estimated the ALV @ 7% of the value of the property shown by the assessee in the Balance Sheet. In our view, the aforesaid action of the Assessing Officer is not at all justified, since there is no basis for determining the ALV of the house properties applying such a method. As noted by us, the Hon'ble Jurisdictional High Court in Tip Top Typography (supra) has rejected Department's claim that municipal ratable value cannot be accepted as bonafide rental value of the property. The Hon'ble Jurisdictional High Court also opined that market rate can be an approved method for determining the fair rental value only when the Assessing Officer suspects the arm's length price shown by the assessee and only after conducting necessary enquiry about the prevailing rate in the locality. Finally, the Hon'ble Jurisdictional High Court following the view taken by the Full Bench of the Hon'ble Delhi High Court observed as under:-
We have also noted the submissions of Shri Ahuja. We are of the opinion that even in the case and matters brought by him to our notice, it is evident that the Assessing Officer cannot brush aside the rent control legislation, in the event it is applicable to the premises in question. Then, the Assessing Officer has to undertake the exercise contemplated by the rent control legislation for fixation of standard rent. The attempt by the Assessing Officer to override the rent control legislation and when it balancs the rights between the parties has rightly been interfered with in the given case by the Appellate Authority. The 5 Shri Hrithik Roshan Assessing Officer either must undertake the exercise to fix the standard rent himself and in terms of the Maharashtra Rent Control Act, 1999 if the same is applicable for leave the parties to have it determined by the Court or Tribunal under that Act. Until, then, he may not be justified in applying any other formula or method and determine method and determine the "fair rent" by abiding with the same. If he desires to undertake the determination himself, he will have to go by the Maharashtra Rent Control Act, 1999. Merely because the rent has not been fixed under that Act does not mean that any other determination and contrary thereto can be made by the Assessing Officer. Once again having respectfully concurred with the judgment of the Full Bench of the Delhi High Court, we need not say anything more on this issue."
8. Since the direction of the learned Commissioner (Appeals) is in consonance with the decision of the Hon'ble Jurisdictional High Court as referred to above, we uphold the order of the learned Commissioner (Appeals) on this issue. Ground no.1, raised by the assessee is allowed for statistical purpose.
9. In ground no.2, assessee has challenged the disallowance of expenditure claimed of ` 5,60,000.
10. Brief facts are, during the assessment proceedings, the Assessing Officer while verifying the return of income noticed that the assessee had claimed expenditure of ` 7 lakh for promotion of feature film "Gujarish". On further verification, assessee explained that the amounts were paid to seven contestants of a television show namely "Saregama" for promoting his brand, he being the main lead artist of the film. The Assessing Officer, however, did not find merit in the 6 Shri Hrithik Roshan submissions of the assessee. He was of the view that all the expenditures relating to making of a film, its promotion, etc., is the responsibility of the producer and not the actor. Therefore, the assessee not being the producer of the film, there is no necessity for him to incur such expenditure. Accordingly, he disallowed deduction claimed of ` 5.60 lakh as the assessee suo-motu has disallowed 1/5th of the expenditure in the computation. Being aggrieved of such disallowance, assessee preferred appeal before the first appellate authority. The learned Commissioner (Appeals) agreeing with the Assessing Officer's view sustained the disallowance.
11. The learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, though, the assessee in terms of the contract with the producer was not required to incur such expenditure, however, for promoting his brand and the movie, the success of which would also enhance the brand value of the assessee, the expenditure was incurred for encouraging the participants of the television show. He, therefore, submitted, as the expenditure incurred is integrally connected with the assessee's profession as an actor it should be allowed.
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Shri Hrithik Roshan
12. Learned Departmental Representative on the other hand relying upon the observations of the Assessing Officer and the learned Commissioner (Appeals) justified the disallowance.
13. We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee is neither the producer nor the financer of the film "Gujarish". He has only acted in the film for a remuneration / fee. Therefore, it is neither his responsibility nor obligation to incur expenditure for promotion of the film. It has also been fairly accepted by the learned Authorised Representative that the terms of the contract do not require the assessee to incur such expenditure. There is nothing on record to also suggest that there is any contract with the T.V. channel to incur such expenditure. Therefore, if as an observer of the TV show, assessee decides to give some cash gifts to the participants for encouraging them, it is voluntary and spontaneous act of the assessee and has nothing to do with the promotion of the feature film or in any way connected to his profession. That being the case, the expenditure claimed, in our view, is not related to assessee's business or profession, hence, is not allowable. This ground is dismissed.
14. In the result, assessee's appeal is partly allowed for statistical purposes.
8
Shri Hrithik Roshan ITA no.1512/Mum./2015 - Department's Appeal
15. Ground no.1, relates to deletion of the addition made of ` 6,32,851, on account of disallowance under section 14A r/w rule 8D.
16. Brief facts are, during the assessment proceedings, the Assessing Officer while verifying the computation of income noticed that in the relevant previous year, assessee has earned exempt income from PPF interest, equity dividend and interest on RBI relief bonds. When the Assessing Officer called upon the assessee to explain why the expenditure relatable to earning of exempt income should not be disallowed under section 14A, the assessee submitted, the exempt incomes were either credited through ECS or reflected by passing journal entry at the year end. Therefore, as the assessee does not incur any expenditure for earning exempt income, no disallowance under section 14A should be made.
17. The Assessing Officer, however, rejected the explanation of the assessee and proceeded to disallow the amount of ` 6,32,851 under section 14A r/w rule 8D(2)(iii). The assessee challenged the disallowance before the learned Commissioner (Appeals).
18. The learned Commissioner (Appeals) noticing that the disallowance made under section 14A on identical facts and 9 Shri Hrithik Roshan circumstances in assessment year 2009-10, has been deleted by the Tribunal while deciding assessee's appeal in ITA no.7239/Mum./2012, dated 15th September 2014, followed the same and deleted the addition on account of disallowance under section 14A.
19. Learned Departmental Representative justified the disallowance made by relying upon the observations of the Assessing Officer. He submitted, as in the impugned assessment year, the Assessing Officer has made the disallowance by bringing new facts on record, the decision of the Tribunal in assessment year 2009-10, would not apply.
20. Learned Authorised Representative on the other hand submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case for assessment year 2008-09 and 2009-10 as the disallowance made in the earlier assessment years were under identical facts and circumstances.
21. We have considered the submissions of the parties and perused the material available on record. As could be seen, the Assessing Officer has made disallowance of administrative expenditure only in terms of rule 8D(2)(iii). It is seen from the assessment order itself, the assessee while justifying the non-disallowance of expenditure under section 14A, has submitted that the exempt income were directly transferred to the accounts of the assessee through ECS or by passing 10 Shri Hrithik Roshan journal entries at the end of the year. This fact has not been controverted by the Assessing Officer. We have noted, under identical facts and circumstances, the Tribunal, Mumbai Benches, in assessee's own case for assessment year 2008-09 and 2009-10, has deleted the addition made on account of disallowance under section 14A, taking note of the fact that the interest income / exempt income were credited to assessee's account through ECS or by passing journal entry. There being no difference in material facts involved in the impugned assessment year, respectfully following the decisions of the Co-ordinate bench of the Tribunal in assessee's own case referred to above, we uphold the order of the learned Commissioner (Appeals) on this issue. Ground no.1 is dismissed.
22. In grounds no.2, and 3, the Department has raised the issue of determination of ALV by the Assessing Officer.
23. While deciding ground no.1 in assessee's appeal being ITA no.1250/Mum./2015, we have upheld the order of the learned Commissioner (Appeals) on this issue. That being the case, the grounds no.2 and 3, are dismissed.
24. In the result, Department's appeal is dismissed. 11
Shri Hrithik Roshan
25. To sum up, assessee's appeal is partly allowed for statistical purposes and department's appeal is dismissed.
Order pronounced in the open Court on
Sd/- Sd/-
N.K. PRADHAN SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED:
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
(Dy./Asstt. Registrar)
ITAT, Mumbai