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M/s Orion Mad Pictures, 201, Kewal Industrial Estate,Senapati Bapat Marg,Lower Parel (W),Mumbai-400013 Vs. Income Tax Officer 11(1)(1), Circle 11(1), Aayakar Bhavan, Mumbai-400020.
January, 19th 2015
                    ,                  ""          

         .. ,                            .. ,   
                    ./I.T.A. No.684/Mum/2011
                 (   / Assessment Year :2007-08)

  M/s Orion Mad Pictures,          /       Income Tax Officer 11(1)(1),
  201, Kewal Industrial Estate,    Vs.     Circle 11(1), Aayakar Bhavan,
  Senapati Bapat Marg,                     Mumbai-400020.
  Lower Parel (W),
           ( /Appellant)           ..      (    / Respondent)

                  . /   . / PAN/GIRNo. :AABFO3367M

              / Appellant by            : Shri K Gopal
                /Respondent by            Shri Premanad J

                / Date of Hearing
                                                 : 1.1.2015
               /Date of Pronouncement : 16.01.2015

                                / O R D E R

 Per B.R.BASKARAN, Accountant Member:

       The assessee has filed this appeal challenging the order dated
 1.11.2010 passed by Ld CIT(A)-3, Mumbai and it relates to the assessment
 year 2007-08. The assessee is contesting following additions through the
 original grounds of appeal, additional grounds and revised grounds of
       (a)     Addition made u/s 40(a)(ia) of the Act ­ Rs.19,00,316/-
       (b)    Disallowance of interest expenditure

 2.   We have heard the parties and perused the record. The assessee is a
 partnership firm engaged in the business of production and distribution of
                                     2                     I T A N o . 6 8 4 / Mu m / 2 0 1 1

motion pictures.   The first issue relates to the disallowance made u/s
40(a)(ia) of the Act. The assessing officer has noticed that the assessee
did not deduct tax at source u/s 194I of the Act in respect of hiring of
plant, machinery, equipment, furniture and fittings, even though the
assessee had deducted tax at source at a lower rate u/s 194J of the Act.
Since there was short deduction of tax at source, the AO disallowed a sum
of Rs.28,12,412/- u/s 40(a)(ia) of the Act. In the appellate proceedings,
the Ld CIT(A) confirmed the action of the AO in principle. However, he
noticed that certain payments have been made to Individuals and the TDS
rate applicable on such payments u/s 194I was lower than that applicable
to non-individuals.    Accordingly he directed the AO to work the
disallowance afresh.

3.    Before us, the Ld A.R submitted that the short deduction of tax due
to application of wrong provisions of TDS will not attract disallowance u/s
40(a)(ia) of the Act. In this regard, he placed reliance on the decision of
Hon'ble Calcutta High Court rendered in the case of CIT Vs. S.K. Tekriwal
(361 ITR 432), wherein it was held that the short deduction of tax at
source will not attract disallowance u/s 40(a)(ia) of the Act. Respectfully
following the above said decision, we set aside the order of Ld CIT(A) on
this issue and direct the AO to delete the disallowance.

4.    The next issue relates to the disallowance out of interest
expenditure claimed by the assessee. The Ld A.R submitted that the
assessing officer has disallowed part of interest expenditure on the
reasoning that the partners have withdrawn interest bearing funds for
personal purposes. He submitted that the Ld CIT(A) also confirmed the
same. The Ld A.R submitted that the assessee has received interest free
advances from the distributors and the said funds were only withdrawn by
the partners. In this regard, he invited our attention to pages 60 & 61 of
                                    3                     I T A N o . 6 8 4 / Mu m / 2 0 1 1

the paper book and submitted that the assessee has made one to one link.
He submitted that the Ld CIT(A) has not considered those statements.

5.    We also heard Ld D.R on this issue. According to the assessee, the
partners have withdrawn only interest free funds and according to the
assessee, the said fact has been established by preparing a statement,
which is placed at pages 60-61 of the paper book filed by the assessee.
Admittedly, the tax authorities have not considered the said contentions of
the assessee.    Accordingly, we are of the view that this issue requires
fresh examination at the end of the assessing officer. Accordingly, we set
aside the order of Ld CIT(A) and direct the AO to reconsider this matter
afresh by duly considering the contentions of the assessee and also the
information and explanations that may be furnished by the assessee and
take appropriate decision in accordance with the law.

6.    In the result, the appeal filed by the assessee is treated as allowed
for statistical purposes.

      The above order was pronounced in the open court on 16th

            16th Jan 2015    

       sd                                       sd

(.. / H.L. KARWA)                        (..  ,/ B.R. BASKARAN)
  / PRESIDENT                              /Accountant Member
  Mumbai:16th Jan, 2015.

. ../ SRL , Sr. PS
                            4                 I T A N o . 6 8 4 / Mu m / 2 0 1 1

        /Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent.
3.     () / The CIT(A)- concerned
4.      / CIT concerned
5.      ,     ,                   /
     DR, ITAT, Mumbai concerned
6.     / Guard file.

                                              / BY ORDER,

                                        (Asstt. Registrar)
                              ,  /ITAT, Mumbai
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