2 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr
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IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI N.K. PRADHAN, HON'BLE ACCOUNTANT MEMBER ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff v. A.C.I.T Range – 16(1) 901, 9th Floor, Freeda One Aayakar Bhavan, M.K. Road, Carter Road, Bandra (West) Mumbai-400 020 Mumbai – 400 050 PAN: AAJPS 6596 A (Appellant) (Respondent) Assessee by : Shri Madhur Agarwal & Shri Pankaj Jain Department by : Shri Sushil Kumar Poddar Date of Hearing : 25.10.2018 Date of Pronouncement : 31.12.2018 O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) – 4, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 27.04.2016 for the Assessment Year 2009-10. 2. The first ground in the appeal of the assessee is against confirming the action of the Assessing Officer in bringing to tax the advances received www.taxguru.in 2 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff by the assessee as income, as against the income shown by the assessee based on completion and release of movies. 3. Ld. Counsel for the assessee, at the outset submitted that the identical issue in appeal is decided against the assessee for the Assessment Year 2006-07 by the Tribunal in ITA.No. 7843/Mum/2010 dated 21.11.2012. 4. On a perusal of the assessment order and appellate order of the Ld. Commissioner of Income-tax (Appeals), we find that the issue has been decided against the assessee by the Tribunal. Thus, respectfully following the said order of the Tribunal for the Assessment Year 2006-07, we sustain the action of the Assessing Officer as well as the Appellate authority and reject the grounds raised by the assessee on this issue. 5. The second ground of appeal, in the appeal of the assessee is with regard to the addition sustained by the Ld.CIT(A) in respect of the advances written off by the assessee. 6. Briefly stated the facts are that, the assessee an individual filed return of income on 8.8.2011 in response to notice u/s. 142(1) declaring loss of ₹.1,66,08,851/-. As the assessee filed return beyond the time specified u/s. 139(4) of the Act the return filed by the assessee was treated as invalid return. Subsequently, the assessment was reopened by issue www.taxguru.in 3 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff of notice u/s. 148 of the Act and the re-assessment was completed u/s. 143(3) r.w.s. 147 of the Act on 27.02.2014 determining the income of the assessee at ₹.10,55,25,340/-. 7. While completing the re-assessment the Assessing Officer on a perusal of the Profit and Loss Account noticed that assessee had written off bad advances of ₹.11,34,59,979/-. Assessee was required to furnish the details regarding written off of bad advances. Assessee vide letter dated 21.01.2014 submitted details of business advances given to M/s. Quest Films and also to Mrs. Ayesha Shroff who is the wife of the assessee. It was contended that in the Financial Year 2001-02 Mrs. Ayesha Shroff’s sole proprietor concern M/s. Quest Films had begun for production of a film called “BOOM” and other movies. It was contended that since Mrs. Ayesha Shroff did not have any independent source of income assessee supported her initially to start up the production house and also acted in her films. It was contended that she had also taken loans from various institutional / non institutional lenders for production of films. It was contended that the film “BOOM” was a multi starrer big project movie which got delayed much beyond the schedule time and this has resulted in great financial crunch as the interest and other production cost increased tremendously. It was contended that as this is her first big venture, assessee had funded to ensure that the film be completed and www.taxguru.in 4 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff successfully released in order to recover the cost as also to save his image and good will as the leading film actor in the industry. It was contended that the film “BOOM” was released during the year 2003 and it was a failure at the box office due to which Mrs. Ayesha Shroff suffered a huge loss and she was not in a position to repay the creditors. She also undertook production of film “SANDHYA” which had almost been completed but could not be released due to several legal, technical issues and financial constraints. It was contended that the above two events have caused great financial burden and resulted in complete shutdown of her production house with no scope for any revival. 8. It was contended that assessee funded his wife’s production house with intention of recovery of funds advanced for production of the films as also to improve his image as a film actor which was possible only if the films were successful at box office and unfortunately none of the films worked at box office successfully. It was contended that since assessee’s wife had borrowed huge amounts from the lenders which could not be paid due to failure of her films, assessee had to rescue her, as non- payment of loans would have resulted into criminal proceedings against her which would have created a serious crisis in his carrier as a film artist having substantial reputation. Therefore, it was contended that since assessee’s wife had no source of income, non-payment of the debts owed www.taxguru.in 5 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff by here to borrowers would have resulted in consequences u/s. 138 of the Negotiable Instrumental Act which are criminal in nature resulting in irreparable damage to his reputation besides causing several mental trauma. 9. It was further contended that assessee stood as guarantor to the amounts borrowed by his wife and therefore any default of her would have resulted in his personal guarantees being invoked. Therefore, in order to preserve his image as an actor he had to resort to borrowings from banks to pay all the debts incurred by his wife. Therefore, it was contended that the said loans are advanced to ensure the recovery of his old loans, to improve his image as an actor for preserving his image as an actor besides preventing any criminal proceedings being lodged against the assessee as well as the assessee’s wife. 10. However, Assessing Officer not convinced with the submissions made by the assessee, rejected the claim of the assessee and brought to tax the advances written off by the assessee as income of the assessee holding that assessee is only a professional actor and he is not in business of giving loans or advances. The Assessing Officer was of the view that money advanced by the assessee to his wife was exclusively personal in nature. He also observed that the assessee has not produced relevant www.taxguru.in 6 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff information in the course of the proceedings. Therefore, Assessing Officer held that the claim made by the assessee does not fulfill the primary condition of any expenses to be allowed as per Income-tax Act, transaction has no business nexus. Therefore, he held that the loans written off are not allowable as deduction. 11. On appeal the Ld.CIT(A) considering the submissions of the assessee and various case laws including the decision of the Hon'ble Bombay High Court in the case of CIT v. K.M. Mody [141 ITR 903] and the decision of the Hon'ble Supreme Court in the case of S.A. Builders v. CIT [ 288 ITR 1], held that the loans given by the assessee are business advances and not personal loans. However, the Ld.CIT(A) held that though these amounts have been advanced in the normal course of business the mere suomoto write off of the same cannot be allowed as deduction, and thus sustained the order of the Assessing Officer. Against this order the assessee is in appeal before us. 12. The Ld. Counsel for the assessee reiterated the submissions made before the lower authorities. He further submitted that assessee funded Mrs. Ayesha Shroff’s production house with an intention of recovery of funds advanced for production of the films as also to improve his image as a film actor which was possible only the films were successful at box www.taxguru.in 7 ITA NO.4838/MUM/2016 (A.Y: 2009-10) Mr. Jackie Shroff office. It is submitted that none of the films did well at box office and she incurred huge loss. It is submitted that this fact should be evidenced from the return of income along with annual accounts filed by Mrs. Ayesha Shroff the assessee’s wife for the year ended 31.04.2004 corresponding to the Assessment Year 2004-05. Wherein Mrs. Ayesha Shroff declared loss of ₹.7,66,76,922/- and this return was accepted by the Revenue and assessment was also completed u/s. 143(3) determining the loss of ₹.7,13,00,138/-. 13. Ld. Counsel for the assessee further referring to Page No. 1 and Page No.