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Income Tax Appellate Tribunal, “D”, BENCH
Before: SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI, JM & &
आदेश / O R D E R
PER BENCH: These cross appeals in /2018 & 1739/Mum /2018 for A.Y.2011-12 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-7, Mumbai in appeal No.CIT(A)-7/IT-34/331/2016-17 dated 19/12 /2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 13/03 /2014 by the ld. Joint Commissioner of Income Tax – 11(1), Mumbai (hereinafter referred to as ld. AO).
2. Now let us take up the revenue appeal in /2018.
Both the parties before us mutually agreed that this revenue appeal is to be dismissed as not maintainable in view of the recent Circular issued by the CBDT dated 08/08 /2019 wherein the revenue has been directed to withdraw the appeal preferred by it before the Tribunal if the tax effect on the disputed issues is less than or equal to Rs.50,00,000/ -. It is well settled that this Circular is binding on the revenue authorities.
Respectfully following the said Circular, the appeal filed by the revenue is dismissed as not maintainable. 4. Incase, if the revenue is able to provide evidence that the case falls under any of the exceptions provided in the circular issued by the CBDT, then the revenue may prefer miscellaneous application for recalling of this order, if they so desire, in which circumstance this order shall be recalled by this Tribunal. 5. In the result, appeal filed by the revenue is dismissed as not maintainable.
The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition of Rs.14,61,000/- on account of cessation of liability in the facts and circumstances of the case. The second issue involved herein is also on account of action of the ld. CIT(A) confirming the addition of Rs.4,91,000/ - on account of cessation of liability. Since the identical issue is involved in both the grounds, they are taken up together and disposed off herein.
We have heard rival submissions. We find that assessee is a fully owned State Government entity and is engaged in the business of providing infrastructural facilities for shooting and post shooting purposes. The assessee filed its return of income for the A.Y.2011-12 on 13/09 /2011 declaring total income at Rs.21,96,31,424/-. We find that assessee has shown outstanding advances from debtors amounting to Rs.228,32,231/ - and financial assistance for Marathi Cinema amounting to Rs.59,41,374/- under the main head “Current Liabilities and Provisions” totalling to Rs.46.04 Crores. The aforesaid sum of advances from debtors included a sum of Rs.14,61,000/ - which were carried forward for number of years. The ld. AO sought to add the sum u/s.41(1) of the Act by treating that the said liabilities had ceased to exist. The ld. AO had drawn to this conclusion based on Note No.14(B)(2) to notes of accounts of the assessee wherein it has been mentioned that these debtors to the tune of Rs.14.61 lakhs represent advances received from those parties for which balance confirmations are not available from the said parties and they are carried forward for number of years without any transactions. The said note also mentioned that in the opinion of the management, the said advances received from debtors are payable to them and hence, same were not written back as income by the assessee.
7.1. Similarly, as per note No.20 of notes of accounts, it was mentioned that financial assistance to Marathi Cinema reflected under current liabilities and provisions includes unidentifiable and unreconciled balance of Rs.4,91,000/ -. Based on this note, the ld. AO concluded that the said liability had also ceased to exist and hence, deserves to be added as income in terms of Section 41(1) of the Act.
7.2. We find that the ld. CIT(A) had upheld the action of the ld. AO on both the additions. We find that admittedly the addition has been made by the ld. AO by invoking the provisions of Section 41(1) of the Act on the ground that the aforesaid liabilities to the tune of Rs.14,61,000/- and Rs.4,91,000/- had ceased to exist. But the crucial point to be noted is that at the time of creation of these liabilities, the assessee had not claimed any deduction or benefit in the earlier years. These amounts were merely advances received from customers and financial assistance received for Marathi Cinema and hence there could not be any claim of deduction by the assessee in the earlier years. Once, there was no claim of deduction made in the earlier years by the assessee are granted by the revenue to the assessee, the provisions of Section 41(1) cannot be made applicable at all. In respect of Rs.4,91,000/ -, we find that the financial assistance had been received from Maharashtra Government for taking up Marathi film which had to be adjuste d as and when film is taken. Hence, the assessee thought it fit not to write back the same and had classified the same as amounts payable. We find from the balance sheet of the assessee as on 31/03 /2014 which was placed on record by the ld. AR before us these amounts were continued to be shown as liabilities. This fact goes to prove that the assessee had not written back these liabilities as not payable to those parties. Hence, the provisions of Section 41(1) of the Act cannot be applied at all in the insta nt case. The reliance placed by the ld. AR on the decision of Ahmedabad Tribunal in the case of P.I.C. (Gujarat) Ltd. reported in 48 SOT 132 and Kolkata Tribunal in the case of Jashojit Mukherjee in dated 04/05/2018 clearly supports the case of the assessee. Accordingly, the grounds raised by the assessee are allowed.
In the result, appeal of the revenue is dismissed as not maintainable and appeal of the assessee is allowed.
Order pronounced in the open court on this 18/09 /2019