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Issues involved: Assessment of payment made to secure ownership of a film for amortisation allowance.
Judgment Summary: Assessment Year 1960-61: The assessee, a company involved in production and distribution of cinematograph films, financed the production of a film called "Sagar Sangame" and entered into agreements regarding ownership with another party. Disputes arose, leading to a settlement where the assessee paid Rs. 20,101 to secure ownership rights. The Income-tax Officer disallowed this payment as part of production cost. The Appellate Assistant Commissioner and Tribunal upheld this decision. Tribunal's Decision: The Tribunal held that the payment was made to acquire rights in the film, enabling the assessee to receive profits. It was deemed to have a revenue character and should be considered in profit or loss calculations. The matter was referred to the High Court under section 66(1) of the Indian Income-tax Act, 1922. Revenue's Contention: The revenue argued that the payment was to perfect the title to the film, constituting capital expenditure. They cited legal precedents to support their position on distinguishing between revenue and capital expenditure. High Court's Analysis: The High Court examined the purpose of the payment in settling disputes and maintaining business operations efficiently. They concluded that the payment was made for business expediency, not to acquire a new capital asset or perfect existing title. Therefore, it was considered revenue expenditure and should be allowed as a deduction. Final Decision: The High Court ruled in favor of the assessee, stating that the payment of Rs. 20,101 was a revenue expenditure and should be allowed as a deduction. The question was answered in the affirmative, and the assessee was awarded costs for the reference. Judges: Sabyasachi Mukharji J. and Sudhindra Mohan Guha.
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