IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 3285/MUM/2023 Assessment Year: 2020-21 Puja Entertainment (India) Deputy Commissioner of Ltd., Income-tax, Pooja House, CTS No.892- Central Circle – 2(4), Vs.

893, Juhu Tara Road, Mumbai Mumbai – 400049 (PAN : AABCP9666R)

(Appellant) (Respondent)

Present for:

Assessee : Shri Dharan Gandhi, Advocate Revenue : Shri Manish Ajudiya Date of Hearing : 21.11.2024 Date of Pronouncement : 13.02.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of Ld.

CIT(A)-48, Mumbai, vide order no. ITBA/APL/M/250/2023- 24/1054796600(1), dated 02.08.2023 passed against the assessment order by Deputy Commissioner of Income-tax, Central Circle – 2(4), Mumbai u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 26.03.2022 for Assessment Year 2020-21.

2. Though the assessee has raised three grounds of appeal, the sole issue involved is in respect of claiming Rs.9,23,62,428/- written off towards old business advances as business expenditure u/s.37(1) or u/s. 28 as business loss, despite bringing on record copies of ledger extracts with all the details and TDS done thereon since ld. Assessing Officer treated the same as bad debts written off for the purpose of making disallowance u/s.36(1)(vii).

3. Facts of the matter are that, assessee is in the business of motion pictures and film production and distribution. Return of income was filed on 20.01.2021, reporting total income at Rs.15,71,94,280/-. While reporting the total income in the return, assessee had claimed write off of old advances as expenditure. In the submissions made before the ld. Assessing Officer, assessee categorically submitted that advances written off in the books of account are old advances given for the new ventures in ordinary course of business for new movies proposed to be released in near future. However, due to unforeseen reasons, new ventures did not materialise. Assessee tried to recover the advances or utilise the same with other ventures with the same party, but all the efforts went in vain. Since the projects could not be materialised and the advances never got converted into revenue, they were never offered for income in any of the preceding years. Further, these advances were non- recoverable business advances and were not in the nature of loan. Accordingly, the same have been claimed as business expenditure u/s. 37(1) or business loss u/s. 28. However, ld. Assessing Officer proceeded to treat the claim of the assessee u/s. 36(1)(vii) by holding it as claim of deduction for bad debts. According to him, since assessee did not fulfil the conditions prescribed u/s.36(1)(vii) nor that assessee fell in the exception provided in the section 36(2)(i) of assessee not being in the money lending business, he proceeded to complete the assessment by disallowing the claim and added the same to the total income. Aggrieved, assessee went in appeal before the ld. CIT(A).

4. Before ld. CIT(A), assessee made a detailed explanation on the conduct of business undertaken by it which is peculiar to the industry to which assessee belongs. It submitted that in the line of business in which assessee is engaged, it is always better to obtain date wise schedule of highly reputed actors, actresses, directors or other artists. In order to reserve their schedule, payment is made is advance and the dates are reserved. Once the project details are shared with artists, either the same is accepted or rejected by them. If the artist accepts the project, production of the film starts and once the movie is released, revenue from such movie is offered for tax and the advance payment is settled against the artist's invoice. If the artist does not accept the project or the story line, the advance payment made to them is non-refundable but stands to the party's account until new project is appro