2014 (9) TMI 932 - AT - Income Tax

Disallowance of write off of cost of production of television serial as abandoned stock in trade - Held that - in case of film/television serial, the cost of production is to be treated as stock in trade and further that in case of abandoned film or teleserial the expenditure is to be allowed as business expenditure. The learned Commissioner of Income-tax (Appeals) has further rightly observed that the cost of production was written off by the assessee as per the market value of the serial as on the said date which was calculated at ₹ 39,52,000. The said calculated/ assessed market value of ₹ 39,52,000 had nothing to do with the further rejection of the proposal of the assessee by the Doordarshan vide letter dated January 22, 2010 which ultimately resulted in treating the cost at nil. We do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) - Decided against Revenue.

Summary

Issues:
1. Write off of cost of production of television serial as abandoned stock in trade.
2. Disallowance of the write off by the Assessing Officer.
3. Appeal against the order of the Commissioner of Income-tax (Appeals) by the Revenue.

Analysis:
1. The Revenue contested the write off of the cost of production of a television serial as abandoned stock in trade amounting to Rs. 40,06,707. The Assessing Officer disallowed the write off, stating it was premature as there was no corresponding sale or revenue earned against the serial. The Assessing Officer held that the loss pertained to a different assessment year and not the current one. The Commissioner of Income-tax (Appeals) allowed the write off, considering the rejection of the serial by Doordarshan and the reduction in value over time. The Commissioner relied on case law supporting the allowance of such expenditures as business expenses.

2. The Commissioner of Income-tax (Appeals) noted that in the case of an abandoned film or television serial, the expenditure is to be allowed as business expenditure. The cost of production was written off based on the market value of the serial, which was calculated at Rs. 39,52,000. The rejection of the proposal by Doordarshan did not affect this value. The Commissioner found no issue with the write off and dismissed the Revenue's appeal.

3. The judgment highlighted that the cost of production of a television serial can be treated as stock in trade, and in cases of abandoned serials, the expenditure can be allowed as business expenses. The decision was based on various case laws supporting such allowances. The order of the Commissioner of Income-tax (Appeals) was upheld, stating there was no merit in the Revenue's appeal. The appeal was dismissed, and the judgment was pronounced on September 12, 2014.