9911796707
TMI Blog1983 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 6,16,060 and with other expenditure, the total outlay was Rs. 13,17,205, which resulted in a gross loss of Rs. 4,44.938 after setting off the receipts, in striking the accounts of that previous year. However, the trading account for the year ended 31-3-1975, showed gross profit of Rs. 4,75,230 which included subsidy received from the Andhra Pradesh Government amounting to Rs. 50,000. In the return for the assessment year 1975-76, corresponding to the previous year ended 31-3-1975, the assessee excluded this amount of Rs. 50,000 and admitted the income of only the balance before setting off the loss carried forward from the earlier years. According to the assessee, the subsidy received was a capital receipt and not liable to income-tax. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was produced was treated as stock-in-trade and, therefore, an amount received in respect of expenditure incurring for acquiring stock-in-trade could not be treated as capital receipt. According to the revenue, the intention of the Government to encourage the film industry might have been motivated by certain cumulative advantages, such as developing ancillary industries and employment opportunities, but such an intention could not govern the character of the receipt in the hands of the assessee. It was, thus, argued that the assessment should be restored. 5. On the other hand, it was contended on behalf of the assessee that the decision of the Cuttack Bench should be followed because it had been rendered in respect of the Andhra Pradesh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic shall be excluded till six channel recording equipment is available in the State. (5) A certificate from a film studio or studios in the State of Andhra Pradesh to the effect that the film has been shot or processed and printed therein. (6) The entire film is produced in the studios in the locales of the State of Andhra Pradesh. (7) The raw film required has been purchased to the extent available at any place within the State. In the relevant previous year the rule further provided that the feature film shall be screened by the Committee and recommended for the subsidy, though later it was given up as redundant because no feature film which had applied for subsidy had been refused and every one of them had been certified by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the undisputed fact is that the subsidy went only to reduce the cost of production of the feature film and it is so exhibited even in the accounts of the assessee. The cost of production of a feature film is acknowledged to be revenue expenditure because the feature film itself is treated as stock-in-trade, while drawing up the trading account. The Income-tax Rules also provide in rules 9A and 9B for amortization of such cost in ascertaining the taxable profit. Therefore, the subsidy which went to reduce such cost of production can only be treated as a revenue receipt. By reducing the revenue expenditure the income of the assessee is augmented and in the present assessment year since the expenditure was nil, the income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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