2015 (10) TMI 1397 - AT - Income Tax

Cost towards abandoned film - CIT(A) allowed the claim - Held that - Assessee is in the business of film production, claimed ₹ 3,38,58,888/- as allowable deduction on the project fauz mein mauz as there was no taker of the film, consequently, the assessee abandoned the same and debited the expenditure so incurred on the production of the same as work in progress and routed the same in its profit & loss account. The disallowance cannot be made on account of cost of abandoned film; hence no addition is being made on this account. See CIT vs Rajesh Khanna 2011 (9) TMI 979 - BOMBAY HIGH COURT - Decided in favour of assessee.

Issues:

1. Allowability of cost of abandoned film as revenue expenditure.
2. Interpretation of film production as stock-in-trade.
3. Application of judicial pronouncements in determining revenue expenditure.

Analysis:

Issue 1: Allowability of cost of abandoned film as revenue expenditure
The primary issue in this case revolved around the allowability of the cost of an abandoned film as revenue expenditure. The Revenue contended that the ld. Commissioner of Income tax (Appeals) erred in allowing the cost of the film as a deduction, arguing that the expenditure was capital in nature. However, the appellant, a film producer, treated the film as stock-in-trade and therefore claimed the expenditure as an allowable deduction. The Tribunal examined the facts and noted that the film was abandoned due to lack of interest, leading to the expenditure being written off as revenue expenditure. The Tribunal referenced various judicial decisions, including those from the Bombay High Court, to support the allowance of the expenditure. Ultimately, the Tribunal found in favor of the assessee, dismissing the appeal of the Revenue.

Issue 2: Interpretation of film production as stock-in-trade
A crucial aspect of the case was the interpretation of film production as stock-in-trade by the assessee. The Tribunal noted that the assessee treated the film as stock-in-trade, justifying the writing off of the cost of the abandoned film as revenue expenditure. This treatment was consistent with the position taken by the assessee from the assessment stage onwards. The Tribunal considered this interpretation in conjunction with the relevant judicial pronouncements and found no fault in the approach adopted by the assessee, leading to the dismissal of the Revenue's appeal.

Issue 3: Application of judicial pronouncements in determining revenue expenditure
The Tribunal extensively analyzed the application of judicial pronouncements in determining the allowability of the expenditure on the abandoned film. The Tribunal referred to decisions from the Tribunal and the Bombay High Court, which supported the treatment of such expenditure as revenue expenditure when the film is considered stock-in-trade. The Tribunal highlighted that no contrary facts or decisions were presented by the Revenue to challenge the applicability of the cited judicial precedents. Consequently, the Tribunal upheld the decision of the ld. Commissioner of Income tax (Appeals) based on the consistent application of relevant judicial pronouncements, resulting in the dismissal of the Revenue's appeal.

In conclusion, the Tribunal affirmed the allowability of the cost of the abandoned film as revenue expenditure, emphasizing the treatment of film production as stock-in-trade and the application of established judicial precedents in reaching its decision.

← Previous Next →