ITAT allowed write-off of advance given to wife by Jackie Shroff for production of ‘BOOM’

[2019] 101 taxmann.com 455 (Mumbai – Trib.)

Facts:

a) Assessee-Jackie Shroff had advanced certain amount to production house run by his wife’s proprietary concern-Quest Films for production of movies.

b) Movie ‘Boom’ produced by the Quest Films failed on box office due to which assessee’s wife suffered huge losses and was not in a position to repay the debts of assessee and other lenders as well.

c) To support his wife, assessee had claimed advances given to her as business loss and suo moto written off same as bad debts.

d) Assessing Officer (AO) rejected the claim of assessee.. CIT(A) upheld order of AO by contending that mere suo moto write off of the advances couldn’t be allowed as deduction. Aggrieved-assessee filed the instant appeal before the ITAT.

 

The ITAT held in favour of assessee as under:

1) Assessee had advanced moneys to Quest Films for two purposes, first to build up and boost his career and second to promote the business of his wife so as to recover the moneys already advanced to her.

2) It demonstrated that the moneys were advanced as a measure of commercial expediency. When the moneys are advanced as measure of commercial expediency, such advances are in the nature of business advances and the write off of such advances should be allowed as deduction under section 37(1) or under section 28(i) as business loss.

3) CIT(A) held that the advances written off by the assessee were business advances and there was no challenge by the revenue to this finding.

4) Once the advances were held to be business advances, they were allowable as deductions either under section 37(1) or under section 28(i). Deduction couldn’t be denied merely on the ground that the assessee had suo moto written off the advances.