HC allows payment by Dharma Productions to SRK owned Company

It was observed that the assessee company is owned by Mr. Karan Johar and RCEPL is owned by Mr.Shahrukh Khan. Both are known personalities of Indian film industry. The authorities have not disputed the fact of providing services by Mr.Shahrukh Khan in the production and marketing of the film `Kaal’. The film was released under joint banner of Karan Johar and Shahrukh Khan which itself is an material aspect of marketing and publicity of the film. Undisputedly, Mr.Shahrukh Khan has performed in the title song of the film and for which no  separate payment has been made by the assessee. Further, it is evident from the terms and conditions of the agreement that RCEPL shall provide necessary contribution in the field of concept, characterization, dialogue, music, theme etc. in the production of the film. Thus, functions are creative in nature and require personal and professional expertise and, therefore, the confirmation of the party regarding rendering of the services itself is a material evidence.  If the parties to the agreement admitted the role and function of creative work in the film, then, in the absence of any contrary material, the confirmation cannot be doubted. It is further submitted that the Assessing Officer and the  CIT(A) have placed much reliance on the fact that the services are required by Mr. Shahrukh Khan and not by RCEPL. The Tribunal disagreed with the said view on the ground that the services are creative in nature and demand personal expertise and talent which could be rendered by somebody on behalf of the company. Therefore, when no separate  payment was made or alleged to have been made to Mr. Shahrukh Khan for the services rendered and when the parties have confirmed that, all the services are rendered under the agreement, then only inference can be drawn from the given facts and circumstances is that the services rendered by Mr.Shahrukh Khan are on behalf of RCEPL and under  the contractual obligation. It is further observed that apart from the services of creativity, the assessee also claimed that RCEPL provided the cinematographic equipment for the production of the film. It is to be noted that the equipments are essential and inevitable for production of the film. There cannot be a case that the assessee has not used the equipment in production of the film. One important aspect of the matter is that the assessee has not booked  any expenditure in respect of the hire charges of these very equipments. Hence the claim cannot be termed as bogus claim. The assessee has given the comparative chart of the equipment hire charges of various films and contended that the hire charges are very less in comparison to the other film. It is further observed that from the chart, it is clear that higher charges of the equipments of film `Kaal’ is less in comparison to other films. This fact has not been disputed by the Revenue. It was further observed that the assessee has produced the confirmation of RCEPL in that regard and no finding has been given that the confirmation is false. The assessee filed bills of transportation of equipments issued in  the name of RCEPL. Even otherwise, the Assessing Officer has not given any finding that the bills are bogus. The Tribunal, therefore, came to the conclusion that the assessee has established that the payment has been made as per agreement between the parties and against the services provided by RCEPL and hence it is allowable under Section  37(1) of the Act.