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TMI Blog1991 (11) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... e feature film will have to be regulated under r. 9A of the IT Rules providing for amortisation of production expenses to be allowed over a period of years on the film being certified by the Board of Censors and exhibited for some minimum period. The assessee's film not having been certified for exhibition no part of the expenditure can be allowed. He also noticed that a feature film bearing the same name but with a slightly different story was completed by the assessee and exhibited in the year 1983. To the assessee's contention that the film in the making has to be treated as stock-in-trade and the loss of stock-in-trade is to be recognised as a trading loss, the Officer held that the feature film in production is a capital asset and, therefore, the loss of it cannot be allowed as a revenue expenditure under s. 37 of the IT Act. The draft assessment order was placed before the IAC of IT under s. 144B of the IT Act. The learned IAC agreed with the assessee that it had abandoned the production of the film called ``Theeram Thedunna Thira'' in 1979 and the film of that name released later on was a different one. He also agreed with the assessee that the loss sustained by him is a bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee in respect of the expenditure incurred in the preceding previous year in the production of the feature film that was abandoned in the midstream in the course of the previous year relevant to the asst. yr. 1980-81. The issue is not that the loss sustained by the assessee is a capital loss. The Revenue itself has recognised it as a trading loss but had only allowed the expenditure incurred during the relevant previous year but not the expenditure incurred in the preceding year. 4. We thus heard rival submissions and perused the records. Though the learned ITO has raised several objections in the course of the draft assessment order, ultimately the Revenue has accepted that the assessee has incurred trading loss in the production of the feature film "Theeram Thedunna Thira" on it being abandoned in the previous year relevant to the asst. yr. 1980-81. The learned IAC of IT in his directions under s. 144B of the IT Act also accepted that the film was in fact abandoned during the relevant previous year. Therefore, the submissions made by the learned Departmental Representative on the basis of the draft assessment order are beside the point. The only question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the accounting year were rightly taxed in the ratio of the decision of the Cochin Bench (Special Bench) of the Tribunal dated 29th Oct., 1984 in Excel Productions vs. ITO (First) (1985) 11 ITD 459 (Coch) (SB) : (1985) SOT (Coch) 608 and ITA No. 103 (Coch) 1983 for the asst. yr. 1979-80 in the assessee's own case. He deleted from the income the subsidy received for the film ``Ponnapuram Kotta' as it was not produced during the year. The Revenue is in appeal. The assessee is not in appeal. 6. We have heard rival submissions. The issue had come up for consideration before the Special Bench and the case is reported in Taxman's Selected Orders of ITAT (1985) page 608. The Special Bench went through the film subsidy scheme and held as follows as per headnotes: ``The conditions laid down in the rules for the grant of the subsidy clearly indicated (i) that the purpose of the subsidy was to give an incentive for production of full length feature films within the State in order to promote film industry within the State (ii) that the scheme did not specify anything abount the particular technological qualities or merits of the feature films to be produced, nor had placed any l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such conversions except for a Full Bench decision of the Andhra Pradesh High Court reported as Nathmal Bankatlal Parikh vs. ITO (1980) 15 CTR (AP) 216 (FB) : (1980) 122 ITR 168 (AP)(FB). In view of the preponderance of judicial opinion on this subject in favour of the assessee, he allowed the claim. The Revenue is aggrieved. 8. We have heard rival submissions. An engine is only a part - an important part for that matter - of a motor vehicle. The vehicle can be run by either petrol engine or by diesel engine. The assessee's case is that its motor vehicle fitted with petrol engine is a very old one and has suffered depreciation over the years and the engine was worn out by wear and tear. Therefore, instead of going in for another petrol engine the assessee opted for a diesel engine. The machine was purchased not for holding it separately but only in replacement of a part of the same asset, namely, the car. By substituting the diesel engine for the petrol engine the carrying capacity of the car is not at all increased. In fact, there will be cost savings in future on fuel, maintenance and repairs and that would be to the advantage of the Revenue also in the future years. No doubt, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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