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2015 (12) TMI 519 - DELHI HIGH COURTWorking of Rule 9B - scheme of computation of business income as envisaged under Sections 28 to 44 - Held that:- In the present case, the separate Trading Accounts drawn up by the Assessee in respect of four films for the financial year ended 31st March, 1991 in question indicate a loss which is sought to be carried forward under Rule 9B of the Rules but the Assessee has in fact shown a profit of ₹ 76,751.99/- in its Profit & Loss Account for the year ended 31st March, 1991. This includes the expenditure incurred by the Assessee for the publicity and advertisement of the four films in question. If the Assessee had also charged the expenditure incurred on the cost of positive prints in respect of the four films in question to the Profit and Loss Account, the Assessee’s Profit & Loss Account for the year would have reflected a loss of ₹ 40,21,039.01/- (cost of prints in respect of the four films amounting to ₹ 40,97,791/- less the profit of ₹ 76,751.99/- disclosed by the Assessee in its Profit & Loss Account). The question whether the expenditure incurred by the Assessee is absorbed in a particular year would depend on the income generated by the Assessee in that year. However, it was incorrect on the part of the Assessee to include the cost of prints along with the MG Royalty amount for the purposes of determining the amount to be carried forward under Rule 9B of the Rules. The language of Rule 9B is unambiguous and the Assessee cannot be permitted to claim a carry forward of the cost of distribution rights, which is in variance with the computation as provided in Rule 9B of the Rules. Decided in favour of the Revenue and against the Assessee. Disallowance made by the AO under Section 40A(3) - CIT(A) deleted the addition - Held that:- In the present case, the AO does not dispute that the Assessee carried on its business in Delhi and its officers had to travel to Bombay to negotiate the purchase of distribution rights. The Assessee had also contended that such payments were made as the producers required the payments urgently at various sites where films being produced by them were being shot and it was expected that such payments be made in cash in the normal course of conducting business.In our view, the question whether the Assessee’s business exigencies required payments to be made in cash, is a question of fact. The ITAT has returned a finding in favour of the Assessee and it is not possible to conclude that such finding is without any basis or any material on record. The ITAT’s decision, thus, cannot be held to be perverse. Accordingly, the question of law is answered in favour of the Assessee and against the Revenue.
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