9911796707
TMI Blog1994 (9) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... e film by way of perpetual lease for a period of 99 years for a consideration of Rs. 14.96,000 and therefore the entire cost has to be amortised and allowed as deduction. The Assessing Officer went into the agreement dated 1-10-1984 and noticed that the assessee was required to pay only a sum of Rs. 6,95,799 at the time of granting the distribution rights and the balance amounts are to be paid in four instalments on the dates specified in the agreement. He also noticed that the film was released in Kerala on 31-8-1984 and the assessee had exhibited the film from 1-10-1984, i.e., more than 90 days prior to the close of the accounting year. Against this background, the Income-tax Officer looked into the provisions of rule 9B of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act. Admittedly the assessee is following the mercantile system of accounting on which there is no dispute before us. The liability to pay the impugned amount of Rs. 14,96,000 arise under an agreement dated 1-10-1984. Some of the clauses relevant are as follows : In the recital it has been stated that all the entire right, title and interest including the world negative rights of the picture " Aarante Mulla Kochu Mulla " by way of perpetual lease for a period of 99 years from the date of the agreement was to be given for a consideration of Rs. 14,96,000. Clause 2 of the agreement is as follows : " In consideration of the Lessors granting the Lessees the aforesaid rights, the Lessees agreed to pay to the Lessors consolidated considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of Rs. 14,96,000 and the manner in which the consideration was to be disbursed was also specified in the agreement. Thus the liability for a sum of Rs. 14,96,000 arose under the contract upon its execution, only the payment of part of the consideration was deferred to future dates, that does not mean the liability for the agreed consideration of Rs. 14,96,000 did not crystallise on the date of the agreement. Thus the liability for the expenses has been actually incurred. The Madras High Court in the case of Pereira Roche v. CIT [1966] 61 ITR 371 held that the expression " actually paid " or " paid " is not to be understood in a physical sense, but in the sense that the expenditure is actually " incurred ". For these reasons, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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