M/S. Orion Mad Pictures, Mumbai vs Assessee

BEFORE HON'BLE S/SHRI H.L. KARWA, PRESIDENT AND B.R.BASKARAN (AM) सव ी एच.एल. कावा, अ य एवं बी.आर.बा करन, लेखा सद य आयकर अपील सं./I.T.A. No.684/Mum/2011 ( नधारण वष / Assessment Year :2007-08)

M/s Orion Mad Pictures, बनाम/ Income Tax Officer 11(1)(1), 201, Kewal Industrial Estate, Vs. Circle 11(1), Aayakar Bhavan, Senapati Bapat Marg, Mumbai-400020. Lower Parel (W), Mumbai-400013 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIRNo. :AABFO3367M

अपीलाथ ओर से / Appellant by : Shri K Gopal यथ क ओर से/Respondent by Shri Premanad J

सन ु वाई क तार ख / Date of Hearing : 1.1.2015 घोषणा क तार ख /Date of Pronouncement : 16.01.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The assessee has filed this appeal challenging the order dated 1.11.2010 passed by Ld CIT(A)-3, Mumbai and it relates to the assessment year 2007-08. The assessee is contesting following additions through the original grounds of appeal, additional grounds and revised grounds of appeal.

(a) Addition made u/s 40(a)(ia) of the Act - Rs.19,00,316/-

(b) Disallowance of interest expenditure

2. We have heard the parties and perused the record. The assessee is a partnership firm engaged in the business of production and distribution of 2 I T A N o . 6 8 4 / Mu m / 2 0 1 1

motion pictures. The first issue relates to the disallowance made u/s 40(a)(ia) of the Act. The assessing officer has noticed that the assessee did not deduct tax at source u/s 194I of the Act in respect of hiring of plant, machinery, equipment, furniture and fittings, even though the assessee had deducted tax at source at a lower rate u/s 194J of the Act. Since there was short deduction of tax at source, the AO disallowed a sum of Rs.28,12,412/- u/s 40(a)(ia) of the Act. In the appellate proceedings, the Ld CIT(A) confirmed the action of the AO in principle. However, he noticed that certain payments have been made to Individuals and the TDS rate applicable on such payments u/s 194I was lower than that applicable to non-individuals. Accordingly he directed the AO to work the disallowance afresh.

3. Before us, the Ld A.R submitted that the short deduction of tax due to application of wrong provisions of TDS will not attract disallowance u/s 40(a)(ia) of the Act. In this regard, he placed reliance on the decision of Hon'ble Calcutta High Court rendered in the case of CIT Vs. S.K. Tekriwal (361 ITR 432), wherein it was held that the short deduction of tax at source will not attract disallowance u/s 40(a)(ia) of the Act. Respectfully following the above said decision, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance.

4. The next issue relates to the disallowance out of interest expenditure claimed by the assessee. The Ld A.R submitted that the assessing officer has disallowed part of interest expenditure on the reasoning that the partners have withdrawn interest bearing funds for personal purposes. He submitted that the Ld CIT(A) also confirmed the same. The Ld A.R submitted that the assessee has received interest free advances from the distributors and the said funds were only withdrawn by the partners. In this regard, he invited our attention to pages 60 & 61 of 3 I T A N o . 6 8 4 / Mu m / 2 0 1 1

the paper book and submitted that the assessee has made one to one link. He submitted that the Ld CIT(A) has not considered those statements.

5. We also heard Ld D.R on this issue. According to the assessee, the partners have withdrawn only interest free funds and according to the assessee, the said fact has been established by preparing a statement, which is placed at pages 60-61 of the paper book filed by the assessee. Admittedly, the tax authorities have not considered the said contentions of the assessee. Accordingly, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to reconsider this matter afresh by duly considering the contentions of the assessee and also the information and explanations that may be furnished by the assessee and take appropriate decision in accordance with the law.

6. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

The above order was pronounced in the open court on 16th Jan,2015.

घोषणा खल ु े यायालय म दनांकः16th Jan 2015 को क गई ।

sd sd

(एच.एल. कावा/ H.L. KARWA) (बी.आर. बा करन,/ B.R. BASKARAN) अ य / PRESIDENT लेखा सद य/Accountant Member मब ंु ई Mumbai:16th Jan, 2015.

व. न.स./ SRL , Sr. PS 4 I T A N o . 6 8 4 / Mu m / 2 0 1 1

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मब ुं ई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER,

सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai