2014 (12) TMI 568 - HC - Income Tax

Determination of cost of production of the film - allowability under Rule 9A(3) Held that - The Commissioner and the Tribunal concurrently and rightly noted that this is an attempt to get over and purporting to reopen an assessment of a partnership firm in which the Assessee was a partner - even if Rule 9A is applied, the assessee was entitled to claim the un-recouped cost of production in terms of Rule 9A(3) of the Rules - This un-recouped cost has been determined at a sum of ₹ 2,93,73,793/- by the AO in the assessment of the firm for AY 2004-05 and the same has become final - It is not open to the AO of the assessee to redetermine the cost of production in the assessment of the assessee - even the alternative plea of the assessee that de hors the provisions of Rule 9A, the difference between the cost of acquisition of the film Rudraksh to the assessee and the cost of realization from the exhibition of the film during the previous year should be allowed as a deduction, is acceptable thus, the order of the Tribunal is upheld as no substantial question of law arises for consideration - Decided against revenue.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding determination of cost of production under Rule 9A(3) of the Income Tax Rules, 1962 for the Assessment Year 2005-2006.

Analysis:
1. The Revenue appealed against the Income Tax Appellate Tribunal's order that partially allowed the Assessee's appeal and dismissed the Revenue's appeal. The main issue revolved around the Assessing Officer's determination of the cost of production under Rule 9A(3) of the Income Tax Rules, 1962. The Tribunal noted attempts to reopen the assessment of a partnership firm, M/s. Karma Entertainment, in which the Assessee was a partner. The film production and distribution business of the firm was scrutinized, revealing discrepancies in the cost of production claimed by the Assessee upon taking over the firm's business.

2. The Tribunal affirmed the Commissioner's decision that the Assessing Officer erred in making adjustments related to M/s. Karma Entertainment's assessment for the year 2004-2005 when assessing the Assessee for the year 2005-2006. The Tribunal concurred with the Assessee's claim that the un-recouped cost of production should be allowed, as per Rule 9A(3), based on the firm's previous assessment. The Tribunal also rejected the Revenue's argument that the cost of acquisition and realization from the film exhibition should be deducted, upholding the Assessee's loss claim.

3. Ultimately, the Tribunal found no substantial question of law raised in the appeal, as the factual findings and conclusions were supported by the evidence presented. The Tribunal dismissed the appeal, confirming the Commissioner's decision and emphasizing the correctness of the Assessee's claims based on the provisions of Rule 9A and the specific circumstances of the case.

This detailed analysis highlights the key legal issues, the Tribunal's reasoning, and the final decision, providing a comprehensive overview of the judgment.