9911796707
|
Home
Issues:
1. Whether the purchase cost of the film 'Pomposh' paid by the assessee-company could be allowed as an admissible revenue expenditure for the assessment year 1956-57? Analysis: The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, where the main issue was whether the sum of Rs. 60,000, being the purchase cost of the film 'Pomposh', could be considered as an admissible revenue expenditure for the assessment year 1956-57. The assessee, a private limited company engaged in processing and printing movie films, had purchased the film 'Pomposh' for Rs. 60,000 from M/s. Patel India Ltd. The Income-tax Officer disallowed the claim for amortization, suspecting the bona fides of the purchase, as the film was deemed a flop with no exploitation value. The Appellate Assistant Commissioner and the Tribunal also upheld the disallowance, considering the film as a capital asset for advertisement purposes rather than a revenue expenditure. The Tribunal, however, allowed the purchase cost of the film as business expenditure. The issue revolved around whether the expenditure incurred was capital or revenue in nature. The revenue contended that the acquisition of the film was a capital expenditure, aimed at attracting future customers through advertisement, and thus not eligible for deduction under section 10(2)(xv) of the Act. On the other hand, the assessee argued that the film was acquired for advertisement purposes, and the expenditure should be considered part of the advertisement expenditure, hence a revenue expenditure. The Tribunal had found that the film was purchased to serve as a model for exhibition to customers for advertisement. However, the nature of the asset acquired and the enduring benefit from the expenditure were crucial in determining whether it was capital or revenue expenditure. The court held that the film 'Pomposh' was acquired as a capital asset for advertisement purposes, not for immediate exhibition but to attract future customers for the color processing business. Therefore, the expenditure incurred for purchasing the film was deemed a capital expenditure, not a revenue expenditure. The court disagreed with the Tribunal's decision to allow the purchase cost as a deduction in computing the business income of the assessee-company for the assessment year 1956-57. Consequently, the court answered the question in the negative, against the assessee-company, who was directed to pay the costs of the reference to the revenue.
|
