Gangani Film Production, Surat vs Assessee

1.Gangani Film Production बनाम/ 1.The Income Tax- 225, Sunrise Chambers Vs. Officer, Ward-9(2) Mini Bazar Surat Varachha Road Surat 2. The Income Tax Officer 2. Gangani Film Ward-9(2), Surat Production, Surat थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAGFG 0311A (अपीलाथ# /Appellants) .. ($%यथ# / Respondents)

Assessee by : Shri M.K. Patel, AR Revenue by : Shri M.K. Singh, Sr.DR

ु वाई क( तार)ख / सन Date of Hearing 24/03/2015 घोषणा क( तार)ख /Date of Pronounce ment 17/04/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

These cross-appeals by the Assessee and the Revenue are directed against the order of the Ld.Commissioner of Income Tax(Appeals)-V, Surat ('CIT(A)' in short) dated 12/11/2009 pertaining to Assessment Year (AY) 2006-07.

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2. First we take up the Assessee's appeal in ITA No.202/Ahd/2010 for AY 2006-07. The Assessee has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming disallowance of Rs. 65,300 on account of crane trolley expenses as alleged unexplained expenditure.

2. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming addition of Rs. 1,93,180 on account of cameraman expenses disallowed u/s 40(a)(ia) of the I.T. Act.

3. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining disallowance of Rs. 10,41,492 on account of laboratory expenses.

4. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining 25% disallowance of Rs. 51,308 on account of travelling expenses as alleged unexplained expenditure.

5. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining 25% disallowance of Rs.12,832 on account of vehicle expenses as alleged unexplained expenditure.

6. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining 50% disallowance of Rs. 33,467 on account of electric power (studio) expenses as alleged unexplained expenditure.

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7. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining 50% disallowance of Rs.1,85,000 on account of music expenses as alleged unexplained expenditure.

8. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in sustaining 50% disallowance of Rs.95,288 on account of studio expenses as alleged unexplained expenditure.

9. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper.

10. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.

2.1. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 17/12/2008, thereby the Assessing Officer (AO in short) made various disallowances of expenses; viz. disallowance of crane-trolley rent expenses of Rs.65,300/-, disallowance of camera-man salary expenses of Rs.1,93,180/-, disallowance of laboratory expenses of Rs.16,69,492/-, disallowance of publicity expenses of Rs.4,96,065/-, disallowance of travelling expenses of Rs.1,02,615/-,disallowance of vehicle expenses of Rs.25,663/-, disallowance of artist expenses of Rs.1,21,294/-, disallowance of electric power expenses of Rs.66,933/-, disallowance of music expenses of Rs.3,70,000/-, disallowance of studio expenses of ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07 -4-

Rs.1,90,575/- and made addition of Rs.1,80,000/- on account of under statement of income. Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee, partly allowed the appeal. While partly allowing the appeal, the ld.CIT(A) confirmed the disallowances made on account of crane-trolley rent expenses, cameraman expenses, sustained 25% of disallowance made on account of travelling expenses, sustained 25% of disallowance made on account of vehicle expenses, sustained 50% of disallowance made on account of electric-power (studio) expenses, sustained 50% of disallowance made on account of music expenses and sustained 50% of disallowance made on account of studio expenses. Aggrieved by the order of the ld.CIT(A), both the Assessee and the Revenue are now in cross-appeals before us.

3. In assessee's appeal ground No.1 is against confirmation of disallowance of Rs.65,300/- made on account of crane-trolley expenses. The ld.counsel for the assessee submitted that the authorities below were not justified in making the disallowance and confirming the expenditure. He submitted that the assessee is engaged in film production and assessee had produced and released a Gujarat Film named "Me To Palvade Bandhi Preet". The ld.counsel for the assessee submitted that as per Rule 9A of the Income-tax Rules, in case, the film is not released for exhibition on a commercial basis at least 90 days before the end of such ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07 -5-

previous year, the cost of production of the film in so far as it does not exceed the amount realized by the film producer by exhibiting the film on a commercial basis or the amount for which the rights of exhibition are sold or, as the case may be, the aggregate of the amounts realized by the film producer by exhibiting the film and by the sale of the rights of exhibition, shall be allowed as a deduction in computing the profit and gains of such previous year; and the balance, if any, shall be carried forward to the next following previous year and allowed as a deduction in that year. The ld.counsel for the assessee submitted that in view of the provision, the authorities below were not justified in making the disallowances and sustained the same.

3.1. The ld.Sr.DR submitted that the assessee was required to substantiate its claim of expenditure of crane-trolley rent expenditure. He submitted that the assessee failed to furnish the complete details with regard to address of payee which was not given by the assessee, therefore the AO was justified in making the disallowance.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made disallowance by observing as under:-

"The film has been released on 11.02.2005. Therefore, question of Crain trolley rent expense does not arise during the previous year ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07 -6-

relevant to the assessment year under consideration. If at all, the expenses were incurred in the earlier year, the assessee was required to prove the expenses by supporting evidences. Not a single piece of paper in the form of evidence to support Crain trolley rent expenses has been furnished. The assessee furnished a chart showing expenses incurred during F.Y. 2002-03 to F.Y. 2005-06. It may be reiterated that expenses shown in the chart remained unsupported barring Laboratory expenses incurred during F.Y. 2002-03. On perusal of the said chart it is seen that no such expenses were claimed incurred in earlier years. This proves that crain trolley expenses are not real but mere an attempt to inflate expenses to reduce tax liability. The expenses are claimed incurred in cash which gives enormous scope to inflate the expenses. The expenses are not verifiable. Complete address of payee was not given. In view of this Crain trolley rent expense is held to be inadmissible. Accordingly, the Crain trolley rent expenses of Rs.65,300/- is disallowed and added back to the total income of the assessee."

4.1. The ld.CIT(A) confirmed the finding of the AO by observing as under:-

"5. I have perused both the positions. As regards crane trolley rent expenses it is admitted by the appellant that he was unable to produce the vouchers. The assessing officer has given a definite finding of fact that the expenditure is not supported by relevant evidences. Further, no justifiable reason has been given as to how said expense is necessarily required to be incurred. Therefore, I do not consider it proper to interfere with the findings of assessing officer."

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4.2 The assessee has not produced any evidence/material in support of its claim before the AO or ld.CIT(A). Therefore, we do not see any reason to interfere with the order of the authorities below, the same is hereby confirmed. Thus, this ground of assessee's appeal is rejected.

5. Ground No.2 is against sustaining the disallowance of expenditure made on account of salary expenses of camera-man. The ld.counsel for the assessee submitted that the authorities below were not justified in confirming the addition. However, he admitted the fact that in support of the expenditure, no evidence was placed.

5.1. On the contrary, ld.Sr.DR supported the orders of the authorities below.

6. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact in para5.1 of his order by observing as under:-

"5.1. Coming to the issue of disallowance of cameraman salary, the expenses have been incurred in cash and are not verifiable because the person to whom the payments have been made has evaded the notice. Therefore the genuineness of the claim made by the assessee is not established. Even otherwise, the assessee was required to deduct TDS on such payments made in respect of work contract given to the cameraman by the assessee. The appellant has taken a position that provision of section 40(a)(ia) is not applicable as it comes into effect from assessment year 2005-06 prior to which the payments have been made. There is no evidence to support the assessee's contention that ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07 -8-

the payments were made prior to the A.Y. 2005-06. Further, the assessee has contended that on each occasion the payments have been made below Rs.20,000/-, thus implying that the provision of 194C is not applicable. As per provision of section 194C(3)(i) where the aggregate of amount of such sum credited or paid or likely to be credited or paid during the F.Y. exceeds Rs.50,000/-, the person responsible for such sums shall be liable to deduct Income-tax u/s.194C. Therefore, even if in each occasion the payment has been made below Rs.20,000/-, aggregate amount paid is above Rs.50,000/-, therefore, requiring the assessee to deduct tax at source u/s.194C r.w.s.40(a)(ia). In view of this, I do not find any merit in the submission of the appellant and disallowance is confirmed."

6.1. We do not see any reason to interfere with the findings of the ld.CIT(A), same is hereby upheld. Thus, this ground of assessee's appeal is rejected.

7. Ground No.3 is against sustaining the disallowance of Rs.10,41,492/- made on account of laboratory expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining the addition. He submitted that the ld.CIT(A) failed to appreciate the fact that the entire expenditure pertains to the film release in February-2005 which is allowable as deduction in view of Rule 9A of the I.T.Rules.

7.1. On the contrary, ld.Sr.DR supported the order of the AO. He submitted that the ld.CIT(A) has rightly confirmed the addition.

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However, he submitted that the ld.CIT(A) ought to have confirmed the entire disallowance.

8. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding in paras-8 & 8.1. which read as under:-

"8. I have considered both the positions. The disallowance has two components, one is Rs.10,41,492/- and another Rs.6,28,000/-. It is clear from the facts that the expenditure of Rs.10,41,492/- was incurred in 2002-03. Thus this expenditure is not pertaining to the film released during the year under reference. Therefore, assessing officer's findings on this point is concurred with. The appellant has also admitted that the expenditure was allowable against the income earned on the release of film "Mandovada Ropavo Manaraj" which was released in earlier years. The A.R.'s contention that there would be loss to the extent of Rs.10,41,490/- against the aforesaid film and loss would be allowable for set off against the business income for the year under consideration. The A.R. has admitted that the above amount was inadvertently carried forward to the extent year instead of claiming deduction. While there could be merit in the submission of the appellant, the fact remains that the assessee has not claimed this amount in the respective year and as such no loss has been determined in assessment in any earlier assessment year. Therefore, the question of carrying forward this undetermined/unassessed loss to be set off against the income of the current assessment year does not arise. The loss is required to be assessed first to be eligible for carry forward to the subsequent years in accordance with the provision of the Act. Therefore the submission of the appellant is hypothetical in nature and is not permissible under the law. In view of this, the disallowance of RS.10,41,492/- is confirmed.

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8.1. As regards disallowance of Rs.6,28,000/-, it forms a part of Rs.12,56,000/- said to have been incurred in F.Y. 2004-05. This expenditure pertains to the film "Me to Plavade Bandhi Preet"

released during the year under reference. 50% of the expenditure has been claimed in A.Y. 2005-06 and remaining unclaimed expenditure shown as closing WIP has been claimed during the year under reference. Therefore, there is no double deduction as observed by the assessing officer. The claim made in consonance with the Rule 9A of I.T.Rules is eligible for deduction. The disallowance to this extent is therefore deleted."

8.1. The ld.counsel for the assessee could not controvert the finding of the ld.CIT(A) by placing any material on record. Therefore, we do not find any reason to interfere with the order of the ld.CIT(A),same is hereby upheld. Thus, this ground of assessee's appeal is rejected.

9. Ground No.4 is against sustaining 25% disallowance of Rs.51,308/- on account of travelling expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining 25% disallowance made by the AO. He submitted that the ld.CIT(A) ought to have deleted the entire disallowance.

9.1. On the contrary, ld.Sr.DR submitted that the admitted fact is that the assessee could not produce any evidence in support of its claim, therefore the AO was justified in making the disallowance of the expenditure. He submitted that any claim of the expenditure the onus is on the assessee to prove that such expenditure was incurred.

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10. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made ahoc disallowance @ 50% purely on estimation basis. Ld.CIT(A) reduced the same treating adhoc disallowance to 25%. Admittedly, there is no supporting evidence was produced by the assessee. Even before this Tribunal as well, the assessee has not placed any evidence, proving the expenditure. Therefore, we do not see any reason to interfere with the finding of ld.CIT(A), same is hereby confirmed. This ground of assessee's appeal is dismissed.

11. Ground No.5 is against sustaining 25% disallowance of Rs.12,832/- on account of vehicle expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining 25% disallowance made by the AO. He submitted that the ld.CIT(A) ought to have deleted the entire disallowance.

11.1. On the contrary, ld.Sr.DR submitted that the admitted fact is that the assessee could not produce any evidence in support of its claim, therefore the AO was justified in making the disallowance of the expenditure. He submitted that for any claim of the expenditure the onus is on the assessee to prove that such expenditure was incurred.

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12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made ahoc disallowance @ 50% purely on estimation basis. Ld.CIT(A) reduced the same treating adhoc disallowance to 25%. Admittedly, no supporting evidence was produced by the assessee. Even before this Tribunal as well, the assessee has not placed any evidence, proving the expenditure. Therefore, we do not see any reason to interfere with the finding of ld.CIT(A), same is hereby confirmed. This ground of assessee's appeal is dismissed.

13. Ground No.6 is against sustaining 50% disallowance of Rs.33,467/- on account of electric power expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining 50% disallowance made by the AO. He submitted that the ld.CIT(A) ought to have deleted the entire disallowance.

13.1. On the contrary, ld.Sr.DR submitted that the admitted fact is that the assessee could not produce any evidence in support of its claim, therefore the AO was justified in making the disallowance of the expenditure. He submitted that any claim of the expenditure the onus is on the assessee to prove that such expenditure was incurred.

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14. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made the disallowance on the ground that assessee has not produced any supporting evidence. Ld.CIT(A) reduced the same treating adhoc disallowance to 50%. Even before this Tribunal as well, the assessee has not placed any evidence, proving the expenditure. Therefore, we do not see any reason to interfere with the finding of ld.CIT(A), same is hereby confirmed. This ground of assessee's appeal is dismissed.

15. Ground No.7 is against sustaining 50% disallowance of Rs.1,85,000/- on account of music expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining 50% disallowance made by the AO. He submitted that the ld.CIT(A) ought to have deleted the entire disallowance.

15.1. On the contrary, ld.Sr.DR submitted that the admitted fact is that the assessee could not produce any evidence in support of its claim, therefore the AO was justified in making the disallowance of the expenditure. He submitted that any claim of the expenditure the onus is on the assessee to prove that such expenditure was incurred.

16. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below.

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We find that the AO had made the disallowance on the ground that assessee has not produced any supporting evidence. Ld.CIT(A) reduced the same treating adhoc disallowance to 50%. Even before this Tribunal as well, the assessee has not placed any evidence, proving the expenditure. Therefore, we do not see any reason to interfere with the finding of ld.CIT(A), same is hereby confirmed. This ground of assessee's appeal is dismissed.

17. Ground No.7 is against sustaining 50% disallowance of Rs.95,288/- on account of studio expenses. The ld.counsel for the assessee submitted that the ld.CIT(A) was not justified in sustaining 50% disallowance made by the AO. He submitted that the ld.CIT(A) ought to have deleted the entire disallowance.

17.1. On the contrary, ld.Sr.DR submitted that the admitted fact is that the assessee could not produce any evidence in support of its claim, therefore the AO was justified in making the disallowance of the expenditure. He submitted that any claim of the expenditure the onus is on the assessee to prove that such expenditure was incurred.

18. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO had made the disallowance on the ground that ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07

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assessee has not produced any supporting evidence. Ld.CIT(A) reduced the same treating adhoc disallowance to 50%. Even before this Tribunal as well, the assessee has not placed any evidence, proving the expenditure. Therefore, we do not see any reason to interfere with the finding of ld.CIT(A), same is hereby confirmed. This ground of assessee's appeal is dismissed.

20. Ground Nos.9 & 10 are general in nature require no independent adjudication.

21. In the result, assessee's appeal is dismissed.

22. Now, we take up the Revenue's appeal in ITA No.614/Ahd/2010 for AY 2006-07. The Revenue has raised the following grounds of appeal:-

"[1] On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of rs.6,28,000/- made by the A.O. on account of laboratories expenses without appreciating the fact that the assessee failed to substantiate such expenses.

[2] On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.4,96,065/- made by the A.O. on account of publicity expenses without appreciating the fact that the assessee failed to substantiate such expenses.

[3] On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.1,80,000/- made on account of under assessment of income without appreciating the fact that the assessee failed to reconcile the figures in the bank account and as shown in the P&L account.

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[4] On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.1,85,000/- made by the A.O. on account of music expenses without appreciating the fact that the assessee failed to substantiate such expenses.

[5] On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.1,21,294/- made by the A.O. on account of Artist expenses without appreciating the fact that the assessee failed to substantiate such expenses.

22.1. First ground of Revenue's appeal is against deletion of addition of Rs.6,28,000/-. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the addition. He submitted that the assessee failed to furnish the requisite evidence in support of its claim. Therefore, the AO was justified in making the addition. He heavily relied on the assessment order. He reiterated the submissions made in the statement of facts.

22.2. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) on this issue. He submitted that under the facts and circumstances of the present case, the AO was not justified in making the addition.

23. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO made addition of Rs.6,28,000/- on the basis that the assessee has claimed this amount twice; i.e. in AY 2005-06 and in 2006-07. Another ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07

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objection of the AO was that the assessee did not furnish any bill or voucher in support of his claim of expenses. However, we find that the ld.CIT(A) has given finding on fact in paras-8 & 8.1 of his order (which are reproduced in para-8 of this order-supra).

23.1. The aforesaid finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is dismissed.

24. Second ground of Revenue's appeal is against deletion of addition of Rs.4,96,065/- made on account of publicity expenses. Ld.Sr.DR relied on the order of the AO and reiterated the submissions made in the statement of facts.

24.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A).

25. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO made disallowance for want of supporting evidence. However, ld.CIT(A) in para-10 of his order has given finding on fact as under:-

"10. I have considered the reasons given by assessing officer and also the submissions of appellant. It is not disputed that this expenditure ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07

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pertains to the film released during the current year. It is also relevant to consider here that part of the total publicity expenses of Rs.9,45,470/- has been claimed and allowed in the preceding year. Therefore, the balance becomes eligible for deduction during the year under reference. The assessee has produced relevant bills/vouchers in support of the expenditure incurred by it & it is seen that majority of the payment has been made to ETV - M/s.Ushodaya Entertainment Ltd. The publicity is an essential aspect of promotion of film, therefore incurring such expenditure, part of which has already been allowed in the earlier year cannot be denied. Therefore, the balance unclaimed expenses of Rs.4,96,065/- is allowed under Rule 9 of I.T.Rules."

25.1. The aforesaid finding on fact as recorded by the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. Therefore, we see no reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is dismissed.

26. Third ground of Revenue's appeal is against the deletion of addition of Rs.1,80,000/-. The ld.Sr.DR relied on the assessment order and reiterated the submissions made in the statement of facts. 26.1. On the contrary, ld.counsel for the assessee relied on the order of the ld.CIT(A) and submitted that the AO under the facts of the present case was not justified in making the addition.

27. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below.

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We find that the AO made on the basis of difference between the P&L Account and Bank account in respect of receipts of Rs.1,80,000/-. However, ld.CIT(A) has given finding in para-23 of his order which reads as under:-

"23. I have gone through the reasons given by assessing officer and also the submissions of appellant. After carefully considering the issue, the contention of A.R. that right sale income of Rs.2,25,000/- which is credited in P/L account has not been taken into consideration by the assessing officer appears to be correct. The contention of appellant that total income shown in P/L account including right sale income comes to Rs.42,13,328/- which exceeds the total amount deposited in ICIC bank account is found to be correct. As such when income shown in the P/L account is already more than the total deposits in the bank account, there is no question of making addition on the ground that income shown in the profit and loss account is lower than the amount credited in the bank account. Hence, the addition of RS.1,80,000/- is hereby deleted."

27.1. The aforesaid finding of the ld.CIT(A) is not rebutted by the Revenue by placing any contrary material on record. Therefore, we see no reason to interfere with the finding of ld.CIT(A), same is hereby upheld. Thus, this ground of Revenue's appeal is dismissed.

28. Fourth ground of Revenue's appeal is against the deletion of addition of Rs.1,895,000/- made on account of disallowance of music expenses. The ld.Sr.DR relied on the assessment order and reiterated the submissions as were made in the statement of facts.

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28.1. On the contrary, ld.counsel for the assessee supported the order of the ld.CIT(A) on this issue.

29. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the AO made disallowance of music expenses of Rs.3,70,000/-. However, out of disallowance of Rs.3,70,000/-, the ld.CIT(A) deleted a sum of Rs.1,85,000/- by observing as under:-

"19. During the course of appellate proceedings, as regards electric power bill and music expenditure, it has been submitted by the A.R. that assessee was unable to produce the bills as expenditure were incurred in earlier years at the time when production of film "Me To Palvade Bandhi Preet" was in progress and vouchers relating to the same were untraceable at the time of assessment proceedings. It has been vehemently contended that film cannot be produced without incurring expenditure towards music and electric power. The expenditure is incurred in the normal course of business of production of film and the same is required to be allowed from commercial point of view. As regards studio expenses, it has been argued by the A.R that payments have been made through account payee cheques on various occasions & that it was not possible to produce film without incurring above expenses. It has been further argued that if various disallowances/additions are taken into consideration, in that case, net profit ratio jumps up to 83.68% which is unimaginable considering that assessee produced Gujarati Film which was not very successful and was released only in few cites & theatres of Gujarat State.

20. I have gone through the assessment order as well as submission of the A.R. After carefully considering the issues involved, it is apparent that expenses have been disallowed as assessee was not in a position to produce evidences. As assessee could not produce relevant evidences, the action of assessing officer in making the disallowance cannot be regarded as totally invalid. However, at the same time, I also find merit ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07

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in the contention of appellant that without incurring above expense, the production of film is not possible. It is also seen that if various disallowances / additions made in assessment order are taken into consideration, the net profit margin goes utpo 83.68% which appears to be on higher side. In this view of the matter, in my considered opinion, it will be quite reasonable if disallowances are restricted to the extent of 50% of various expenses claimed as above. Accordingly, disallowance out of various expenses mentioned above is confirmed to the extent of 50% & the balance amount is deleted."

29.1. We do not see any infirmity into the order of the ld.CIT(A). If the reasoning adopted by the AO is accepted, it would lead to a distorted figure of profit margin. Hence, we do not see any reason to interfere with the order of ld.CIT(A), same is hereby confirmed. Thus, this ground of Revenue's appeal is dismissed.

30. Fifth ground of Revenue's appeal is against the deletion of addition of Rs.1,21,294/- made on account of disallowance of artist expenditure. The ld.Sr.DR supported the order of the AO and reiterated the submissions made in the statement of facts. 30.1. On the contrary, ld.counsel for the assessee relied on the order of ld.CIT(A).

31. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The AO made the disallowance on the basis that the assessee did not produce any supporting evidence. However, ld.CIT(A) has deleted the disallowance by observing as under:-

ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07

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"17. I have considered the reasons given by assessing officer and also the submissions of appellant. It is true that the production of film is not possible without the help of artists and expenditure claimed is a part of the non-claimed expenses pertaining to earlier year. Moreover, it is not the case of assessing officer that excessive expenditure has been claimed by appellant. Considering the nature of expenses, the claim of assessee is allowed and accordingly, the disallowance of RS.1,21,294/- made by A.O. is hereby deleted."

31.1. We find that the ld.CIT(A) has given a finding that the impugned expenses are part of expenses of earlier years. This finding is not controverted by the Revenue by placing any contrary material on record. Therefore, we do not deem fit to interfere with the order of ld.CIT(A), same is hereby affirmed. Thus, this ground of Revenue's appeal is dismissed.

32. In the result, cross-appeals of the Assessee and Revenue both are dismissed.

Order pronounced in the Court on Friday, the 17th day of April, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 17/ 04 /2015 ट).सी.नायर, व. न.स./T.C. NAIR, Sr. PS ITA No.202/Ahd/2010 (by Assessee) and ITA No.614/Ahd/2010 (by Revenue) Gangani Film Production vs. ITO Asst.Year - 2006-07 - 23 -

आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to : 1. अपीलाथ# / The Appellant 2. $%यथ# / The Respondent. 3. संबं3धत आयकर आयु5त / Concerned CIT 4. आयकर आयु5त(अपील) / The CIT(A)-V, Surat

5. 6वभागीय $ त न3ध, आयकर अपील)य अ3धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड: फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या6पत $ त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 6.4.15 (dictation-pad 12-pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..12.4.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......17.4.15

7. Date on which the file goes to the Bench Clerk.....................17.4.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................