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Extent of the cost of production of a feature film under r. 9A(1). Analysis: The case involved a departmental appeal concerning the cost of production of a feature film named "Veeru Ustad." The assessee had valued the undistributed areas at Rs. 3,58,425, while the ITO contended that the value as per r. 9A for these territories should be included in the assessment, resulting in an addition of Rs. 3,33,321. The CIT (A) found that the assessee could not realize the anticipated cost for these areas and applied r. 9A(9) to conclude that no addition should be made. Additionally, the CIT (A) considered an alternative ground, determining the total cost of production to be Rs. 14,51,930, which also negated the need for an addition. The department appealed the CIT (A)'s decision, arguing that r. 9A(9) was not applicable to cases like this. The departmental representative contended that the rule did not cover valuation of unsold distribution areas, while the assessee's counsel maintained that the assessee had suffered a loss due to the film's failure, warranting the application of r. 9A(9). The ITAT found that while r. 9A did not specifically address valuation of unsold territories, it did allow for the carry-forward of production costs to the next year. Considering the assessee's evaluation of the film's performance and loss incurred, the ITAT upheld the CIT (A)'s decision regarding the valuation of undistributed areas. The ITAT dismissed the departmental appeal, emphasizing that the assessee's assessment of the film's profitability and the incurred loss justified the valuation of undistributed areas at a lower figure. The ITAT declined to base its decision on the alternative submission considered by the CIT (A) due to the inclusion of details not before the ITO, affirming the CIT (A)'s order in favor of the assessee.
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