IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.10.2014 CORAM HON'BLE MR.JUSTICE R.SUDHAKAR AND HON'BLE MR.JUSTICE R.KARUPPIAH T.C.(A).Nos.339 and 340 of 2014 Commissioner of Income Tax Central Circle II Chennai 600 034. .. Appellant Vs. R.S.Suriya .. Respondent PRAYER: Appeals under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'B' Bench, Chennai, dated 23.8.2013 made in I.T.A.Nos.1197 and 1198/Mds/2013 for assessment years 2007-2008 and 2008-2009. For Appellant : Mr.M.Swaminathan Standing Counsel For Respondent : Mr.N.V.Balaji JUDGMENT (Delivered by R.SUDHAKAR, J.) Revenue has filed these appeals challenging order of Income Tax Appellate Tribunal 'B' Bench, Chennai, dated 23.8.2013 made in I.T.A.Nos.1197 and 1198/Mds/2013 for assessment years 2007- 2008 and 2008-2009, by raising following questions of law: (2) (i) Whether on facts and circumstances of case, Tribunal is justified in allowing certain expenditures on adhoc basis though assessee failed to discharge onus and establish that liability rests in him and no on producer to incur such expenditure? (ii) Whether on facts and circumstances of case, Tribunal is justified in allowing expenditure on adhoc basis when assessee failed to adduce proof of having incurred such expenditure wholly and exclusively for purpose of his business? (iii) Whether on facts and circumstances of case, Tribunal is correct in upholding order of Commissioner of Income Tax (Appeals) who has allowed further relief while assessee has not produced any evidence either before Assessing Officer or before Appellate Authorities? (iv) Whether on facts and circumstances of case, Tribunal is correct in upholding order of Commissioner of Income Tax (Appeals) who has allowed further relief when Assessing Officer has determined expenditure based on books of accounts and bank statements? 2. Though wordings of Tribunal giving reasons in support of order dismissing appeals filed by Revenue before Tribunal may not be appropriate in language, we find that there is some justification to accept plea made by respondent/assessee for (3) certain allowable expenditure, which he had claimed before Assessing Officer and Commissioner of Income Tax (Appeals) and was partly allowed by Commissioner of Income Tax (Appeals) in favour of assessee. 3.1. facts in nutshell are as under: assessee claims to be leading film artist. There was search under Section 132 of Income Tax Act, 1961 (for brevity, Act ) in premises of assessee on 19.1.2010. In response to notice under Section 153A of Act, assessee filed his return of income for assessment years 2007-2008 and 2008-2009 admitting total income of Rs.5,21,64,811/- and Rs.6,48,51,620/- respectively. 3.2. assessee claimed professional expenditure to tune of Rs.2,42,44,718/- for assessment year 2007-2008. Assessing Officer made disallowance of Rs.89,00,962/- for want of evidence in respect of expenditure incurred. Likewise, for assessment year 2008-2009, assessee claimed professional expenditure to tune of Rs.3,61,57,151/- and Assessing Officer made disallowance of Rs.97,26,722/- for want of evidence. 3.3. As assessee failed to submit any evidence in support of his claim of expenditure as above, assessments were completed under (4) Section 143(3) read with Section 153A of Act for both assessment years on 30.12.2011. 3.4. Assailing orders passed by Assessing officer, assessee preferred appeals. Commissioner of Income Tax (Appeals), by order dated 27.3.2013, held that though there is no supporting evidence, incurring of expenditure by assessee, who is actor, at different places where shooting takes place cannot be ruled out. He further held that assessee is required to incur expenses on costumes and make up, wig material, health and gymnasium, dance and fight master, stills and publicity, telephone charges, travelling expenses, etc. Commission of Income Tax (Appeals), considering nature of expenses incurred by assessee, deleted addition of Rs.25,00,000/- and Rs.35,00,000/- for assessment years 2007-2008 and 2008-2009 respectively. 3.5. Aggrieved by order of Commissioner of Income Tax (Appeals), department preferred appeals before Tribunal, which confirmed order passed by Commissioner of Income Tax (Appeals) and dismissed appeals filed by department. Hence, Revenue has filed these appeals on questions of law, referred supra. 4. We have heard Mr.M.Swaminathan, learned Standing Counsel (5) appearing for Revenue and Mr.N.V.Balaji, learned counsel appearing for assessee. 5. primal contention of learned counsel for Revenue is that Commissioner of Income Tax (Appeals) as well as Tribunal erred in allowing expenditure on ad hoc basis when assessee has failed to adduce proof of having incurred expenditure for costumes, make up, wig material, etc. 6. For two assessment years, we find that assessee had claimed expenses under various heads. Assessing Officer disallowed some of expenses claimed by assessee in excess of Rs.20,000/- in terms of Section 40A(3) of Act and other expenses claimed were disallowed for want of evidence. But, Commissioner of Income Tax (Appeals) was of view that claim of assessee for two assessment years was justified on account of his professional calling as leading cinema artist. Commissioner of Income Tax (Appeals), taking note of nature of assessee's professional occupation, partly allowed appeal and addition to tune of Rs.25,00,000/- and Rs.35,00,000/- for assessment years 2007-2008 and 2008-2009 respectively was deleted and balance addition was confirmed. relevant portions of orders passed by Commissioner of Income Tax (Appeals) read as under: (6) I.T.A.No.196/11-12/A.II, dated 27.3.2013 (Assessment Year 2007-2008) 6.4. next issue is disallowance of other expenses of Rs.89,00,962/- by holding them as not relevant for purpose of business and also on ground that expenses were not supported by necessary evidences. In this regard, ld.AR has admitted that there are no supporting evidences to prove claim. However, considering nature of expenses which film actor incurs, he requested to take lenient view. I have duly considered matter. Additions of Rs.11,27,100/- and Rs.24,65,149/- have already been sustained in this order. There is no dispute regarding rendering of professional services by appellant. He has also offered professional receipts as his income. Though there is no supporting evidences, incurring of expenditure by appellant actor at different places where shooting takes place cannot be ruled out. He is required to incur expenses on costumes and make-up expenses, wig material, health and gymnasium, dance and fight masters, stills and publicity, telephone charges, travelling expenses etc. It would be fair and reasonable if further expenses of Rs.25,00,000/- is allowed towards this end. Accordingly, addition of Rs.25,00,000/- is deleted and balance addition is confirmed. Hence, ground is partly allowed. I.T.A.No.197/11-12/A.II, dated 27.3.2013 (Assessment Year 2008-2009) 6.3. next issue is disallowance of other expenses of Rs.97,26,772/- by holding them as not relevant for (7) purpose of business and also on ground that expenses were not supported by necessary evidences. In this regard, ld.AR has admitted that there are no supporting evidences to prove claim. However, considering nature of expenses which film actor incurs, he requested to take lenient view. I have duly considered matter. Additions of Rs.6,77,900/- and Rs.1,60,99,940/- have already been sustained in this order. There is no dispute regarding rendering of professional services by appellant. He has also offered professional receipts as his income. Though there is no supporting evidences, incurring of expenditure by appellant actor at different places where shooting takes place cannot be ruled out. He is required to incur expenses on costumes and make-up expenses, wig material, health and gymnasium, dance and fight masters, stills and publicity, telephone charges, travelling expenses etc. It would be fair and reasonable if further expenses of Rs.35,00,000/- is allowed towards this end. Accordingly, addition of Rs.35,00,000/- is deleted and balance addition is confirmed. Hence, ground is partly allowed. 7. Tribunal confirmed order passed by Commissioner of Income Tax (Appeals) holding as follows: 14. .... Being professional actor, there is substantial merit in claim of assessee that travelling expenditure, wig and makeup expenditure would have been incurred by him for keeping up profile required of actor. To presume that all makeup and travelling (8) expenditure of actor would be met by producers, would be off mark. Almost all professional actors are having their own personal makeup technicians in their support staff and also dedicated support staff for grooming. Considering these aspects, we are of opinion that CIT(Appeals) was justified in giving relief of Rs.25 Lakhs on disallowance of Rs.89,00,962/- made by Assessing Officer. We do not find any reason to interfere with relief given by CIT (Appeals). ... 25. As far as Revenue's appeal is concerned, fact situation is almost similar to preceding assessment year. total disallowance made by Assessing Officer, against expenditure of Rs.3,61,57,151/- claimed by assesseem, came to Rs.2,83,63,924/-. Out of above amount, sum of Rs.59,59,101/- was suo motu disallowed by assessee in his computation statement. balance disallowance comprised of sum of Rs.1,60,99,940/- under Section 40A(3), Rs.6,77,900/- under Section 40(a)(ia) of Act and Rs.56,26,983/- for want of evidence. CIT (Appeals) had given relief of Rs.35 Lakhs on disallowance of Rs.56,26,983/-. Break- up of Rs.56,26,983/- shows that it included costume design charges of Rs.8,65,000/-, Dietitian charges of Rs.6 Lakhs, boarding & lodging expenses of Rs.11,98,148/-, Fan Club expenses of Rs.12,63,835/- and Press meeting expenditure of Rs.5 Lakhs. Whole of claim of Dietitian Charges, costume design charges and boarding & lodging charges were disallowed by A.O. In nature of profession of assessee, we cannot say that these (9) expenditures were not relevant and necessary for maintaining his profile. We are therefore of opinion that CIT (Appeals) was justified in giving relief of Rs.35 Lakhs considering relevant aspects and also circumstances of case. We do not find any need to interfere with order of CIT (Appeals). 8. Tribunal, taking note of various heads under which expenses were claimed and also considering merits of assessee's claim for expenditure incurred on account of travelling, wig material, makeup and other supporting professional expenses, justified order of Commissioner of Income Tax (Appeals). 9. assessee pleaded before Commissioner of Income Tax (Appeals) as well as before Assessing Officer that he is professional actor and expended amount on account of wigs, makeup and other accessories for purpose of his profession as cine artist and also incurred expenditure on account of his professional calling as actor. While major part of claim was disallowed under Section 40A(3) of Act, Commissioner of Income Tax (Appeals) found that there is reasonableness in claim of assessee insofar as expenses incurred towards travelling, wig, makeup, costumes, etc. Commissioner of Income Tax (Appeals) has decided issue on basis of statement made by assessee and taking into consideration overall expenditure claimed under various heads, thought it fit to allow (10) expenditure in sum of Rs.25 Lakhs under these heads for assessment year 2007-2008 and Rs.35 Lakhs for assessment year 2008-2009. said finding of fact was confirmed by Tribunal. 10. We find this is pure question of fact and there is no substantial question of law involved for us to consider matter as tax appeal. It is also not specific case of Revenue that order of Commissioner of Income Tax (Appeals) as well as Tribunal is perverse or in violation of any provision of law. grounds of appeal raised are pure questions of fact and, therefore, we find no merits in these appeals. In result, these appeals are dismissed. No costs. Consequently, M.P.No.1 of 2014 in T.C.(A) No.340 of 2014 is closed. (R.S.J.) (R.K.J.) 27.10.2014 Index : No Internet : Yes sasi To: 1. Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "B", Chennai. 2. Secretary, Central Board of Direct Taxes, New Delhi. (11) 3. Commissioner of Income Tax (Appeals) - II Chennai. 4. Assistant Commissioner of Income Tax Central Circle II(5)(i/c), Chennai. (12) R.SUDHAKAR,J. and R.KARUPPIAH,J. (sasi) T.C.(A).Nos.339 and 340 of 2014 27.10.2014 Commissioner of Income-tax, Central Circle-II, Chennai v. R. S. Suriya