2018 (4) TMI 1554 - HC - Income Tax

Write off of expenditure incurred in respect of a teleserial as abandoned - allowable business expenditure - nature of expenditure - whether the cost of production of a abandoned teleserial/feature film shall be treated as Revenue expenditure or capital expenditure? - Held that - The issue has to be decided as per the Circular issued by the Central Board of Direct Taxes in Circular No.16/2015 dated 06.10.2015, wherein it is stated that the cost of production of an abandoned feature film is to be treated as revenue expenditure and allowed as per the provisions of Section 37 of the Income Tax Act. This circular was taken note of by the Division Bench of this Court in Tiruvengadam Investments Pvt. Ltd., Vs. Assistant Commissioner of Income Tax 2016 (1) TMI 1369 - MADRAS HIGH COURT . Though the circular pertains to a feature film, we find that there cannot be any distinction between tele-serial and feature film as the circular deals with the aspect regarding to the cost of production of a film. - Decided against revenue

Summary

Issues Involved:
1. Interpretation of whether the write off of expenditure incurred in respect of an abandoned teleserial can be treated as a business expenditure during the relevant assessment year.

Analysis:

The High Court of Madras heard an appeal by the Revenue against the order passed by the Income Tax Appellate Tribunal. The appeal was related to the Assessment year 2002-03. The substantial question of law admitted for consideration was whether the Tribunal was correct in holding that the write off of expenditure for an abandoned teleserial could be treated as a business expenditure, contrary to Rule 9A of the Income Tax Rules. The court referred to Circular No.16/2015 issued by the Central Board of Direct Taxes, which stated that the cost of production of an abandoned feature film should be treated as revenue expenditure under Section 37 of the Income Tax Act. The court noted that there should be no distinction between a tele-serial and a feature film as the circular pertained to the cost of production of a film in general. Therefore, the circular was held to be applicable to the case at hand.

The court concluded that based on the Circular No.16/2015, the cost of production of an abandoned teleserial should be treated as revenue expenditure and allowed as per the provisions of the Income Tax Act. Consequently, the appeal filed by the Revenue was dismissed, and the substantial question of law was answered in favor of the assessee and against the Revenue. No costs were awarded in this matter.