CINEYUG ENTERTAINMENT PVT. LTD.,MUMBAI vs. DCIT - CC - RANGE 3(1), MUMBAI

The assessee has challenged the disallowances of expenses incurred by the assessee made by the Assessing Officer and confirmed by the ld. CIT(A).

The brief facts of the case are that the assessee company is sister concern of Cineyug Group, which is engaged in the business of event management of various shows/concerts/awards ceremonies, etc. The assessee filed its return of income for the (A.Y.2015-16) Cineyug Entertainment Pvt. Ltd. vs. DCIT impugned year dated 29.09.2015, declaring total income at Rs.Nil and claiming loss to be carry forward of Rs.1,23,48,406/-. The assessee’s case was selected for scrutiny and the assessment order dated 28.12.2017 was passed u/s. 143(3) of the Act where the A.O. made various additions/disallowances and determined the total income at Rs.2,80,73,722/-.

The assessee was in appeal before the ld. CIT(A), challenging the disallowance of expenses incurred by the assessee where the ld. CIT(A) partly allowed the claim of the assessee.

The assessee is in appeal before us, challenging the impugned addition made by the A.O. and confirmed by the ld. CIT(A). The total expenditure by the assessee before the A.O. are tabulated hereunder:

Ground nos. 1.1 & 1.2 pertains to the disallowance of production expenses of Rs.10 lacs out of the total production expenses. It is observed that the assessee has debited various production expenses, aggregating to Rs.37,62,54,787/-.

In an appeal before the ld. CIT(A), it was held that as the facts of the case in A.Y. 2014-15 are identical to this, in which case an amount of Rs.10 lacs was disallowed out of the production expenses, the ld. CIT(A) restricted the disallowance on production expenses to Rs.10 lacs based on the previous year disallowance. In absence of any additional evidences filed by the assessee to substantiate its claim, we find no infirmity in the order of the ld. CIT(A) in restricting the disallowance to Rs.10 lacs on the production expenses claimed by the assessee. Hence, ground nos. 1.1 & 1.2 raised by the assessee is dismissed.

Ground nos. 2.1 & 2.2 pertains to the disallowance of wages paid amounting to Rs.8,46,403/-, food expenses amounting to Rs.4,32,812/- and disallowance of the cash expenses amounting to Rs.1,86,714/-. It is observed that the A.O. has disallowed 25% of the amount claimed by the assessee.

Having heard the rival submissions and perused the material on record. It is observed that the assessee has failed to substantiate its claim of expenditure before the lower authorities and has also failed to furnish any documentary evidence supporting its case even before us. In absence of complete documentary evidence to prove that the impugned expenses was incurred wholly and exclusively for the purpose of the assessee’s business, we find no infirmity in the relief given by the ld. CIT(A), restricting the impugned disallowance of 10% of the expenditure claimed. Hence, ground nos. 2.1 to 4.2 raised by the assessee is dismissed.

Ground no. 6 pertains to the disallowance of the conveyance expenses of Rs.13,59,957/- made by the A.O. The assessee has submitted that the ld. CIT(A) has failed to adjudicate this ground of appeal during the first appellate proceeding.

The ld. CIT(A) in an appeal filed by the assessee stated that the assessee has incurred the said expenses in respect of musical show titled ‘Bollywood’ by joint venture with Viacom 18 Media P. Ltd. proposed to be undertaken in 12 cities. It is observed that as the show did not go on well, the assessee had incurred a loss and had claimed the said expenditure. As the assessee has failed to substantiate the fact that the said expenditure was expended wholly and exclusively for the purpose of business, the A.O. has disallowed 50% on adhoc basis. The ld. CIT(A) by relying on the decision of the Hon'ble Apex Court in the case of Dhakeshawari Cotton Mills Ltd. 267 ITR 775 (SC) restricted the disallowance to Rs.7 lacs on the ground that the A.O. has failed to bring on record any evidence to make the impugned adhoc disallowance @ 50% which was exorbitant.

Having heard the rival submissions and perused the materials on record. We are of the considered opinion that the assessee has not furnished any documentary evidence to prove its claim of expenditure under the head ‘lodging and boarding’ before the lower authorities. Even in the second appellate proceeding, the assessee has failed to produce any evidences to substantiate its claim. After considering the nature of the business activity carried out on by the assessee, we are convinced with the disallowance made by the ld. CIT(A), restricting to Rs.7 lacs out of the total claim of Rs.71,85,659/- claimed by (A.Y.2015-16) Cineyug Entertainment Pvt. Ltd. vs. DCIT the assessee. We find no merit in this ground of appeal raised by the assessee and, therefore, this ground is dismissed.

In the result, the appeal filed by the assessee is partly allowed.