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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
आदेश ORDER �ी अिमत शु�ला,�या.स :- PER AMIT SHUKLA, J. M.: The present appeal has been filed by the assessee against impugned order dated 13.08.2012, passed by CIT(A) -3, Mumbai for the quantum of assessment passed under section 143(3), for the assessment year 2009-10, on the following grounds of appeal:
1. On the facts and circumstances of the case, the learned CIT(A) erred in confirming the addition made of Rs.14,03,651/- being 10% of the total cash expenses made which addition made be deleted.
2. The learned CIT(A) failed to appreciate that, all such expenses are incurred in course of the business 2 मॅड एंटट�म�ट �ल�मटेड Mad Entertainment Ltd. and that all such expenses are duly accounted for and supported by vouchers and are verifiable”.
Brief facts qua the issue involved are that, the assessee is in the business of production of commercial films. During the course of the assessment proceedings, the AO noted that, the assessee has debited cash expenses amounting to Rs.1,40,36,506/- and accordingly, the assessee was required to substantiate the claim by producing necessary evidences. In response, the assessee submitted the cash vouchers and also explained the nature of expenses and the requirement of the business. The AO after examining the details of expenses found that most of the expenses were unsupported by third party bills. Accordingly, he disallowed 10% of the said expenses as per the reasoning given at para 4.4 to 4.5.
Before the CIT(A), it was submitted that the incurring of cash expenses are inevitable in the line of TV films and commercials and it is difficult to obtain third party bills. Assessee further explained the nature of expenses, however, Ld. CIT(A) confirmed the said disallowance on the ground that the expenses were purposely kept low to escape the provision of section 40A(b), that is, below Rs.20,000/- and total cash expenses comes to 5.6% of the total expenses claimed, which is very high considering the nature of assessee’s business. Accordingly, he confirmed the disallowance made by the AO.
Before us, the Ld. Counsel submitted the details of expenses, which are in the form of expenses incurred on camera crew; setting of props on sets; on the equipment hire / costumes; lunch for the staff and welfare expenses; stay; location hire; production expenses; traveling expenses and other miscellaneous expenses. The break-up of these expenses given as under:-
3 मॅड एंटट�म�ट �ल�मटेड Mad Entertainment Ltd. Cash Expenses Detail year ending 2009 Asst. year 2009-10 Director Fees Are director fees 393514 393514 393514 Camera Crew Camera Crew 10000 10000 10000 Setting Set/material erection 40500 Setting 400929 441429 441429 Props/Equipment Hire/costumes COSTUMES 2922402 Equipment hire charges 1631042 Props. Hire charges 37939 4591383 Lunch & staff welfare Exp Food & Lunch Exps 1369343 Lunch & Staff Welfare 210319 1579662 1579662 Studio location hire Location Co-ordination Exp. 156000 Location hire charges 1476476 1632476 1632476 Membership & Subscription FILING FEES 3300 3000 3300 Production Expenses Misc. Production expenses 2930069 Stuntman Charges 21,400 2951469 2951469 Travelling Exp. Travelling/Hotel Stay (Production) 1610256 1610256 1610256 Miscellaneous & General Expenses BMC License Fees 12000 Misc. exp 752455 General Office Exps. 58562 823017 823017 14036506 Grand Total Thus, he submitted that no ad-hoc disallowance should be made.
On the other hand, Ld. DR relied on the order of the CIT(A).
4 मॅड एंटट�म�ट �ल�मटेड Mad Entertainment Ltd.
After considering the relevant finding given in the impugned order and material placed on record, we find that, looking to the nature of expenses incurred by the assessee, it is difficult to get a third party bill for most of the expenses and incurring of cash expenses in this line of activities seems to be quite inevitable. However, looking to the facts and circumstances and that some of the expenses cannot be put to full verification, therefore, in the interest of justice, we are reducing the disallowance of cash expenses to 5%. Accordingly, the disallowance on account of cash expenses would be 5% and thus the ground raised by the assessee is partly allowed.