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Before: Shri V. Durga Rao & Shri G. Manjunatha
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals)-18, Chennai dated 20.08.2018 relevant to the assessment year 2016-17.
Facts are, in brief, that the assessee is a film actor. A search under section 132 of the Income Tax Act, 1961 [“Act” in short] was conducted in the premises of the assessee on 30.09.2015. During the course of search, certain incriminating materials have been found and seized. Subsequently, the assessee filed his return of income for the assessment year 2016-17 on 29.07.2016 by declaring total income of 35,42,91,890/-. In the assessment, on verification of profit and loss account, the Assessing Officer has noticed that an amount of ₹.2,92,44,825/- has been claimed as expenditure under the head “Release & Rasigar Mandram expenses”. The Assessing Officer asked the assessee to explain the reasons for incurring such expenditure. The AR of the assessee has submitted before the Assessing Officer that out of the total expenses incurred by the assessee of ₹.2,92,44,825/-, a sum of ₹. 2 crore was paid directly by the Producer M/s. SKT Studios to all the members of the Rasigar Mandram all over Tamil Nadu and Pondicherry through the district head quarters out of the remuneration payable for the movie “Puli”, which were duly offered as income in 153A return filed and the remaining amount of ₹.92,44,825/- was paid directly to the members of Rasigar Mandram by the assessee through the district head quarters by way of cash. The Assessing Officer has considered the explanation given by the AR of the assessee and noted that the assessee has not filed any evidence to show that M/s. SKT Studios have taken the amount from the assessee and spent, to whom the amount was given and mode of payment details, etc. Accordingly, the amount of ₹.2 crore was brought to tax.
So far as balance amount of ₹.92,44,825/- is concerned, the 2.1 Assessing Officer has noted that for the assessment year 2013-14, the assessee has incurred only an amount of ₹.5,05,019/- towards Rasigar Mandram expenses, for the assessment year 2014-15, the expenditure incurred by the assessee was only ₹.4,76,440/- and for the assessment year 2015-16, it was only ₹.7,24,971/-. However, in the assessment year under consideration, the assessee has claimed ₹.92,44,825/- apart from ₹.2 crore incurred by M/s. SKT Studios incurred, which is a huge expenditure incurred by the assessee. In the absence of any evidence, the Assessing Officer disallowed 70% of the expenditure claimed under this head amounting to ₹.64,71,377/- and brought to tax.
The assessee carried the matter in appeal before the ld. CIT(A). The assessee has filed detailed written submissions before the ld. CIT(A). The case of the assessee before the ld. CIT(A) was that the assessee got more than 1000 branches of Fans Association existing all over India particularly in Tamil Nadu and Pondicherry. The head quarters of the fans association are situated in 32 districts of Tamil Nadu and 4 districts of Pondicherry. The branches of the Fans Association are situated in every village, taluk, cities in Tamil Nadu and Pondicherry. Each district has got around 30 to 35 branches. They are more than one lakh members in total in all branches put together. Therefore, it is impossible to collect the supporting vouchers for each and every expense incurred from all ventures of fans associations. However, confirmation from M/s. SKT Studios confirming the payments to the Fans Association were already submitted before the Assessing Officer for verification was again submitted before the ld. CIT(A) and requested the ld. CIT(A) to take a lenient view in considering the nature of expenses which a film actor incurs.
3.1 The AR of the assessee has further submitted before the ld. CIT(A) that the expenses incurred by the assessee and given to the members of the Fans Association towards erecting banners, cut-outs, performing pooja, distribution of sweets and small gifts and expenses for gas balloons, garlands, arathi, conducted pall abhishegam and flowers and also to give free tickets to children orphanages.
The ld. CIT(A), by considering the explanations of the assessee, allowed 50% of total expenses of ₹.92,44,825/-. In so far as addition in respect of ₹.2 crore is concerned, by considering the confirmation letter from M/s. SKT Studios, the ld. CIT(A) has observed that the payment of ₹.2 crore, which is intended to be paid to the assessee by the Producer was taken into account while filing the return of income and claimed the same as expenses. Making addition on the same figure which has already been shown as income in the relevant return of income filed will tantamount to double addition and therefore, the ld. CIT(A) deleted the addition.
Aggrieved, the Revenue carried the matter in appeal before the Tribunal. The ld. DR has submitted that in so far as addition of ₹.2 crore is concerned, the explanation of the assessee is that the assessee has directed M/s. SKT Studios to incur the expenses on behalf of the assessee is only an afterthought, i.e., after conducting search on 30.09.2015 and obtaining a letter from M/s. SKT Studios that the studio has incurred an expenditure is an unbelievable story, which cannot be accepted. The ld. DR further pointed out that in earlier three years, the assessee has incurred only an amount of ₹.5,05,019/- in the assessment year 2013-14, ₹.4,76,440/- in the assessment year 2014- 15 and ₹.7,24,971/- in the assessment year 2015-16. However, in the assessment year under consideration, the assessee has incurred huge expenditure for which no proper explanation was given and therefore, the ld. DR strongly supported the order passed by the Assessing Officer.
On the other hand, the ld. Counsel for the assessee has submitted that in the assessment year under consideration, the assessee has incurred the expenditure comparatively more than that of earlier years for the reason that the assessee wanted to support his fans to maximum extent possible and therefore, huge expenditure was incurred and prayed that the same may be allowed. Further, he has submitted that M/s. SKT Studios have already issued confirmation letter dated 02.10.2015 stating that the Studio had incurred an amount of ₹.2 crore on behalf of the assessee for Rasigar Mandram members all over India based on the list provided to them during the course of release of feature film “Puli” in all the theatres in Tamil Nadu and other states and prayed that the order passed by the ld. CIT(A) may be confirmed.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee is a film actor and incurred an amount of ₹.2,92,44,825/- under the head “Release & Rasigar Mandram expenses”. The case of the assessee is that M/s. SKT Studios have paid ₹.2 crore on behalf of the assessee to the Fans Association of the assessee for the State of Tamil Nadu and Union Territory of Pondicherry and submitted that it is business expenditure. So far as expenditure of ₹.92,44,825/- is concerned, the assessee has directly paid the above amount to the Fans Association of Tamil Nadu and Pondicherry. When the Assessing Officer has asked the assessee as to why such huge amount was incurred in this year compared to previous year, it was submitted that the assessee is a film actor, in the year under consideration, he has decided to take entire burden of the expenditure carried by the Fans Association and incurred the expenditure. Since the assessee has not placed any evidence in support of the explanations of the assessee as to how ₹ 92,44,825/- was incurred, by considering previous year expenditure under the same head, the Assessing Officer disallowed 70% of the expenditure claimed under this head and added back to the total income of the assessee. Ion appeal, the ld. CIT(A) allowed 50% of total expenses of ₹.92,44,825/- and the balance was confirmed.
So far as the expenditure of ₹.2 crore is concerned, the 8. Assessing Officer has rejected the expenditure of the assessee on the ground that there is no evidence to show that M/s. SKT Studios have paid the above amount to the Fans Association of the assessee and the entire expenditure was added to the total income of the assessee. The ld. Counsel for the assessee has submitted that the assessee has already offered the very same amount in his return of income and it this addition is made, it would tantamount to double addition. Before us, by referring to the letter dated 02.10.2015 filed in the form of paper book page 12, the ld. Counsel for the assessee has pointed out that M/s. SKT Studios in their above letter stated that a sum of ₹.2 crore was incurred towards Rasigar Mandram members all over India. The assessee also filed statement of income and expenditure and balance sheet giving various details of the Rasigar Mandam expenses incurred district-wise. We have considered the assessment order and also the CIT(A)’s order and facts of the case. By considering over all facts and circumstances of the case, we are of the opinion that the disallowance to the extent of 50% of total expenses would be reasonable and accordingly, we allow 50% of the total claim of expenses [i.e. 50% of ₹.2,92,44,825/-] and the balance disallowance stands sustained.
In the result, the appeal filed by the Revenue is partly allowed. Order pronounced on 22nd December, 2021.