Jackie Shroff, Mumbai vs Assessee
- CitationITA No.2912/Mum/2013
Ratio decidendi
The rule this decision rests on
Ground 1 (method of accounting / advances): Where the Tribunal has already decided the same issue in the assessee's own case for an earlier assessment year, it is bound to follow that earlier decision; the issue is not res integra, and the earlier ruling holds that under section 145 (as amended w.e.f. 01.04.1997), a hybrid system of accounting is prohibited, so advances received cannot be treated as taxable only on release of films where the assessee has already enjoyed them. Advances received are taxable in the year of receipt, subject to verification at the assessment stage that amounts already offered in earlier years are not taxed again, to avoid double taxation. Ground 2 (interest disallowance): Where money has been borrowed in earlier years and the revenue has produced no material establishing personal use, and the assessee's standard of living as a film star justifies the borrowing, interest on such borrowings is not disallowable on the basis of unsubstantiated suspicion; the nature of the assessee's profession is relevant in assessing the purpose of the expenditure. Grounds 3 to 8 (disallowance of expenses): Where the assessee has already suo motu disallowed expenses of a personal nature and under section 40A(3), and the nature of the assessee's profession as an actor in show business is considered, no further ad hoc disallowance of expenditure is warranted absent a specific basis for it.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
ौी डȣ.मनमोहन, उपाÚय¢, एवं ौी एन.के. ǒबãलैया लेखा सदःय, के सम¢ Before Shri D Manmohan, Vice President & Shri N K Billaiya, AM
आयकर अपील सं./ ITA No.2912/Mum/2013 िनधा[रण वष[ / Assessment Year 2007-08
Shri Jackie Shroff ITO 11(1)(2), 1401 Vastu Towers Co-op Hsg Mumbai Soc., Bandstand Road, Vs. Bandra (W), Mumbai- 400 050 PAN AAJPS6596A (अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
Appellants By : Shri Jitendra Jain Respondent By : Shri Vivek A Perampurna
सुनवाई कȧ तारȣख / घोषणा कȧ तारȣख / Date of Hearing :13.01.2015. Date of Pronouncement :16.01.2015
आदे श / O R D E R
Per N K Billaiya, AM:
This appeal by the assessee is directed against the order of the CIT(A)-3, Mumbai, dated 03.09.2010 pertaining to A.Y. 2007-08. The assessee has raised eight substantive grounds of appeal.
2. Ground no.1 relates to the addition of Rs.1,00,61,000/- on account of the method of accounting adopted by the assessee. This issue is no more res integra as the Tribunal in assessee's own case in AY 2006-07 in ITA No. 7843/Mum/2010 has decided this issue against the assessee and in favour of the revenue. The 2 ITA No.2912/Mum/2013 AY 2007-08
Tribunal has followed its own decision for A.Y. 2005-06 qua ITA No. 6457/Mum/2008. The Tribunal has adjudicated this issue as under:
"3. The issue involved in this ground relates to the taxability of advances received during the year by the assessee. This issue was decided by the Tribunal in ITA No. 6457/Mum/2008 at para-8 page-3 which is as under:
"We have considered the arguments of both the counsels and also perused the orders of lower authorities and the Paper Book submitted by the assessee. We find that for the year under consideration, the assessee has offered income for the year which includes an amount of Rs. 28,48,000/- out of opening advances to which an amount of Rs. 53,52,000/- has been added out of current year's advance totaling to Rs. 82,00,000/-. The total advances received during the year under consideration are at Rs. 1,10,10,062/-. We do not agree with the submission of the counsel that similar practice has been accepted in the past by the department as in our considered view the provisions of sec 145 of the Act have been amended w.e.f 01.04.1997 where in it has been provided that for the purposes of computing the income under the head ' profits & gains of business or profession' the assessee can follow either cash system or mercantile system of accounting thereby prohibiting the hybrid system of accounting, which the assessee was following in earlier years. The CIT[A] while giving relief to the assessee in earlier years has failed to consider the amendment brought under section 145 of the Act . We cannot follow the decisions of the revenue authorities which are inconsistent with the provisions of sec. 145 of the Act. In our considerate view, the method of computing the income by the assessee, is faulty. It is the case of the assessee that the advances are taken as income in the year of the release of the Films which in itself is a faulty practice as the release of the films are not in the hands of the assessee as it is the sole prerogative of the producers of the films, where as the assessee is enjoying the fruits of the advances from the day he gets them. In the film line, producers sign actors and pay for their services as per their Box Office reputation, therefore any payment received by the Actor is according to his USP at the Box Office which is determined at the time of the signing of the agreements. We find that during the year under consideration the assessee has received Rs.1,10,10,062.00 out of which he has already offered Rs.53,52,000.00 in the computation of income . The counsel pointed out that the assessee has also offered Rs 27,58,062.00 in A.Y 2006-07 and Rs.2,50,000.00 in 3 ITA No.2912/Mum/2013 AY 2007-08
A.Y 2007-08 out of the advance of Rs.1,10,10,062.00 . In our humble opinion this issue needs further verification at the assessment stage, we therefore restore this issue back to the files of the AO. The AO is directed to verify the claim of the assessee that he has offered out of the total advance of Rs. 1,10,10,062.00, Rs 27,58,062.00 in A.Y 2006 -07 and Rs.2,50,000.00 in A.Y 2007-08 and if found correct only the balance amount should be taxed in the year under consideration, to avoid double taxation of the same income . This will also cover the decision of the Delhi Bench in the case of ACIT vs Fox Mondal & Co., in ITA 3377 / Del / 2006 relied upon by the assessee."
Following our own findings, We direct the AO verify the claim of the assessee that he has offered out of the total advance of Rs.17931626.00, Rs.9758062.00 in AY 06-07, and if found correct only the balance amount should be taxed in the year under consideration. Ground No.1 with its subgrounds are allowed for statistical purposes."
Respectfully following our own decisions, we direct the AO accordingly. Ground no.1 is allowed for statistical purposes.
3. Ground no.2 relates to the disallowance of interest of Rs.18,58,938/- This issue is also covered by the decision of the Tribunal in ITA No. 7843/Mum/2010 for A.Y. 2006-07, wherein this issue has been considered at para 8, which reads as under:
8. We have perused the order of the Tribunal. We find that at page-8 para-23, the Tribunal has held as under:
"We have considered the arguments from both parties. We find that the money has been borrowed in earlier years. Although the AO has mentioned that the amount as been borrowed for personal usage but has not brought any material on record to substantiate his claim. Further, the assessee being a film star has to maintain a certain set of standard of living for which he may require money from time to time. Even if assuming that the assessee has borrowed money to purchase luxurious car, that would justify looking to the nature of profession of assessee. Considering all these facts into totality, we do not find any merit in the submissions of the DR, findings of the Ld. CIT(A) are accordingly confirmed. Ground No. 2 of Revenue's appeal is dismissed."
4 ITA No.2912/Mum/2013 AY 2007-08
Following our own finding in ITA No. 6457/M/08, ground No. 2 with its sub-grounds are allowed.
Respectfully following our own decision, ground no.2 is allowed.
4. Ground nos. 3 to 8 relates to the disallowance out of expenditures. This issue was also considered by the Tribunal in A.Y. 2006-07 in ITA No. 7843/Mum/2010 at para 9 of its order and at para 11 it has held as under:
"11. The Ld. Counsel for the assessee drew our attention to page-8 of the Paper Book which is computation of income for the year under consideration. We find that the assessee has himself disallowed a sum of Rs. 2,58,942/- being expenses on personal nature and has further disallowed Rs. 95,661/- u/s. 40A(3) of the Act. Considering the nature of profession of the assessee, being an actor in show business, we do not find any reason for further disallowances of expenses more so when the assessee himself has disallowed Rs. 2,58,942/-+Rs. 95,661/- suo motu in its computation of income. Therefore, adhoc disallowances as questioned in ground Nos. 3 to 7 are directed to be allowed as deduction for the year under consideration. Ground Nos 3 to 7 are accordingly allowed."
Ground nos. 3 to 8 are accordingly allowed.
5. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on this 16th day of January, 2015.
Sd/- Sd/-
(D Manmohan) (N K Billaiya) उपाÚय¢ /Vice President लेखा सदःय/ सदःय ACCOUNTANT MEMBER
मुंबई Mumbai; Ǒदनांक Dated : 16th January, 2015.
SA 5 ITA No.2912/Mum/2013 AY 2007-08
आदे श कȧ ूितिलǒप अमेǒषत/Copy षत of the Order forwarded to :
1. अपीलाथȸ /The Appellant. 2. ू×यथȸ / The Respondent. 3. आयकर आयुƠ(अपील) / The CIT(A), Mumbai. 4. आयकर आयुƠ / CIT
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, 'J' Bench, ITAT, Mumbai
आदे शानुसार/ BY ORDER,
स×याǒपत ूित //True Copy//
प/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai
This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.
Research this judgment with Miss Lucy
Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.
Try Miss Lucy free