2010-VIL-418-ITAT-CHE

Equivalent Citation: [2010] 2 ITR 746

Income Tax Appellate Tribunal CHENNAI

I. T. A. Nos. 1329/596 & 597/Mds/2009

Date: 19.01.2010

RS. SURIYA

Vs

DEPUTY COMMISSIONER OF INCOME-TAX

BENCH

Order

JUDGMENT

The order of the Bench was delivered by Abraham P. George (Accountant Member).-This appeal filed by the assessee is directed against the order dated June 2, 2009 of the learned Commissioner of Income-tax (Appeals)-VI, Chennai and relates to the assessment year 2006-07. Ground No. 1 is general in nature and does not need any adjudication.

Vide its grounds Nos. 2 to 9, the assessee is aggrieved that a sum of Rs.55 lakhs being advance received by the assessee as professional receipts were considered as income by the Assessing Officer and this was confirmed by the learned Commissioner of Income-tax (Appeals).

The assessee, who is a renowned film star, had in the relevant previous year received the following amounts for his commitment to do films :

M/s. Photon factory Rs. 20,00,000. M/s. Studio Green Rs. 35,00,000.

It was explained that such amounts were received as advance for acting in films and in later years adjusted against the professional fees. However, the Assessing Officer noting that the assessee was following the cash system, considered such amount as income of the impugned assessment year.

Aggrieved by this, the assessee moved the learned Commissioner of Income-tax (Appeals), who relying on his orders in the assessee's own case for the assessment years 2004-05 and 2005-06 in I. T. A. No. 167/06-07 and 243/07-08 dated December 17, 2008, confirmed the addition.

Now, before us it is submitted by the learned authorised representative that the assessee was a reputed film artist, who chose his films carefully after great deliberation. According to him, sums received by the assessee from the parties mentioned at paragraph 3 above, were with reference to giving priority in dates and neither the storyline of proposed films nor their names, nor the co-artists were known. Therefore, the learned authorised representative argued that the amounts received were only advance for giving a priority in time schedule when called upon to act which was indefinite and hence, such token advance received could not be treated as income. The crux of his argument was that unless the assessee had acted in the film of the parties, who had given the advance, the amounts remained a liability and at no point of time, they had become his income. Strong reliance was placed on the order of the co-ordinate Bench of the Tribunal in the assessee's own case for the assessment years 2004-05 and 2005-06 in I.T. A. Nos. 596/597/Mds./09 dated August 21, 2009. Learned counsel for the assessee also relied on the decision of the Delhi Bench of the Tribunal in the case of K. K. Khullar v. Deputy CIT [2008] 304 ITR (AT) 295 ; [2009] 116 ITD 301 and that of a co-ordinate Bench in the case of S. Priyadarsan v. Joint CIT [2001] 73 TTJ (Chennai) 738 for canvassing his contention that similar advances could not be treated as income.

Per contra the learned Departmental representative submitted that the decision in the assessee's own case for the earlier years, relied on by the learned authorised representative, was distinguishable on facts. On the other hand, according to him, decision of the Co-ordinate Bench in the case of A. Ramki v. Deputy CIT (I. T. A. No. 1219/Mds/02 dated July 28, 2007) and that of Ms. D. Meena v. Deputy CIT (I. T. A. No. 1624/1625/ Mds/2000 dated July 19, 2005) clearly justified the treatment given by the Assessing Officer.

We have perused the orders of the authorities below and heard the rival contentions. There is no dispute that the learned Commissioner of Incometax (Appeals) had confirmed the advance professional fee of Rs. 55 lakhs as income for the impugned assessment year relying on his own decision in the assessee's appeals for the assessment years 2004-05 and 2005-06. It is clear from the assessment order itself that the amounts received by the assessee from M/s. Photon Factory and M/s. Studio Green were not against any particular films. The assessee's contention that income could not be recognised till the artist had acted in the film, for which the advances were received, carries great strength. Storyline was not fixed, neither was the name, not even the co-artists were known. Just because the assessee was following the cash system, it was not obliged to consider all sums received by it as income unless such receipt could be categorised as income. Whether it is the cash system or the mercantile system, a receipt can be treated as income only if such income can be considered as recognised. Just because the assessee had received an amount of advance such sum cannot be treated as income, only for a reasoning that it was following the cash system of accounting. It is on account of this reason that in the assessee's own case for the earlier years, this Tribunal had held that it would not be proper and appropriate to treat professional advance received as income, unless and until proposed assignments had materialised. Though the learned Departmental representative put great efforts to submit that fact situation for the impugned assessment year could have been different from that of the earlier years, which was dealt with by the Tribunal in I. T. A. Nos. 596/597/Mds/09, as aforesaid, we find that the learned Commissioner of Income-tax (Appeals) had confirmed the order of the Assessing Officer for the impugned assessment year based on his own decision for the earlier years, which was later reversed by the Tribunal. As for the reliance placed by learned counsel for the Revenue on the decisions of A. Ramki and D. Meena the former case was decided relying on the latter decision. If we advert to the decision of D. Meena's case, there the assessee who was also a cine artist, had received advance on the basis of a contract for acting in a film. In other words, there was a subsistent contract for acting in a particular film, whereas in the given case the advances were received from two parties with no clear crystallisation of film or the storyline or other aspects of the proposed film. Hence, we are of the opinion that D. Meena's case is not applicable here on facts. In any event, since this Tribunal had taken a view in favour of the assessee in the assessee's own case for earlier years, on similar fact situation, we find no compelling reasons to depart from the view taken earlier. Therefore, we find that amount of Rs. 55 lakhs received by the assessee as advance could not have been treated as his income for the impugned assessment year. Such addition stands deleted. Ground Nos. 2 to 9 of the assessee are allowed.

When ground Nos. 10 and 11 were taken up, it was submitted by the learned authorised representative that he was not pressing these grounds. Therefore, these grounds are dismissed as not pressed.

Vide its grounds Nos. 12 and 13 the assessee is aggrieved regarding disallowance of Rs. 4,89,345 paid by him to one M/s. Lakshmi Communication.

Facts apropos are that the assessee had claimed a sum of Rs. 4,89,345 as agency fees paid to M/s. Lakshmi Communication for managing the call sheets of the assessee. The assessee did deduct Rs. 25,690 as tax from this sum, but remittance thereof was made to the exchequer only on July 28, 2006. Therefore, relying on section 40(a)(ia), the learned Assessing Officer disallowed the claim of the expenses of Rs. 4,89,345. Such treatment was confirmed by the in the assessee's appeal.

Now before us, the learned authorised representative submits that the transactions between the assessee and M/s. Lakshmi Communication did not fall within the purview of section 40(a)(ia) of the Act. According to him, the amounts paid were not in the nature of interest, commission, brokerage, fees for professional service or even for technical services. Hence, it was urged that there was no obligation for the assessee to deduct tax at source. In any case, it was submitted that the assessee had indeed remitted the amount on July 28, 2006 and by virtue of the amendment made to the said section by the Finance Act, 2008 with retrospective effect from April 1, 2005 the disallowance could not have been made. Per contra, the learned Departmental representative supported the order of the authorities below.

We have perused the orders of the authorities below and heard the rival contentions. The first leg of the assessee's contention is that the payments were not in nature of interest, commission, brokerage, fees for professional services or even technical services. No doubt, the payments were made to M/s. Lakshmi Communication for managing call sheets of the assessee. We are of the opinion that management of the call sheets of the assessee could not be considered as professional services or technical services. Expertise required for maintaining call sheets could not be considered to be of a level sufficient to be called as "professional services". Neither any professional qualification was required for giving such services, nor could the Assessing Officer show that such services were rendered by any professionals. There is no case for the Revenue that any professional expertise was required for giving dates on call sheets. Such payment could never be treated as agency fees in any case. Even otherwise by the Finance Act, 2008, an amendment has been made in section 40(a)(ia) of the Act. This amendment has added clause (A) and clause (B) to the said sub-section and accordingly, where tax was deductible and it was so deducted during the last month of the previous year, and remittance thereof was made before the due date specified in section 139(1) of the Act, then disallowance under the said sub-section could not be made. Here, the assessee had deducted the sum and paid it on July 28, 2006, which is well before the due date for filing the return under section 139(1) of the Act and hence by virtue of this amendment, the payment could not have been disallowed. We are, therefore, of the opinion that the disallowance of Rs. 4,89,345 was not called for and such disallowance stands deleted.

When ground Nos. 14 and 15 were taken up, the learned authorised representative submitted that he was not pressing these grounds. Therefore, such grounds are dismissed as not pressed.

In the result the appeal of the assessee is partly allowed.

 

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