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TMI Blog1981 (3) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... illai, P/A of Kolammal, Prop. of Saraswati Pictures, Madras. The history of the assessee's dealing with A.C. Pillai is that the assessee entered into an agreement for distribution of the picture "Ranisamyuktha" with A.C. Pillai of Saraswati Pictures, the producer of the film, on 10-1-1962. The agreement provided for the assessee to receive 15 per cent of the collection for the distribution of the film up to Rs. 1,10,000 of the collections and 40 per cent thereafter. The duration of the agreement was five years and the assessee was liable to pay Rs. 1,10,000 as minimum guarantee, which was to be paid in advance. Rs. 10,000 out of the same was for the purposes of publicity and advertisement for the picture. If, however, the amount due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d minimum when the collection fell short of it, was held by the Civil Court to be not justified. Though the assessee's accounts were accepted to be correct, the Court, on interpretation of the document, came to the conclusion that the assessee was not eligible for any commission because the collections fell short of the minimum guarantee. The City Civil Court found that the actual collections were Rs. 93,050.84 which falls below Rs. 1,10,000 and that, therefore, the assessee was not entitled to the claim of commission of Rs. 13,957.63 and nothing was, therefore, found to be payable to the assessee. This decision was tendered on 11-12-1968. However, the assessee took up the matter to the High Court. It is the assessee's case that Shri A.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the sole proprietrix of Saraswati Pictures. Hence, the AAC was not right in assuming that the amount should have been written off in 1970 because A.C. Pillai died in 1970. It was only during the accounting year that the assessee found that there was no chance of recovery from Smt. Kolammal and the value of the prints was also nil, it was claimed that it is allowable either as a bad debt or a trading loss. The learned departmental representative relied upon the orders of the authorities below. He claimed that it had become time barred long ago. In the alternative he claimed that since the decision of the High Court dismissing the appeal is dated 3-11-1975, two days after the close of the accounting year, it must relate to the immediately s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to provide for the loss at the time of arbitrator's award was not found to be a bar till the matter was decided finally by the Court. He further referred to the decision of the Punjab and Haryana High Court in CIT v. Pretty Cycle Industries [1980] 123 ITR 227 where a similar postponement in anticipation of further adjustments against such accounts was held to be justified. As for the argument of the learned departmental representative that the decision of the High Court dismissing the appeal two days later than the end of the accounting year, he claimed that it is easily answered. The decision to have the appeal withdrawn was taken well before the accounting year and instruction was also given to the counsel during the accounting year. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter to the High Court by its legal advisors. Pending this dispute, the assessee could not make up its mind to write off any part of the debit balance. In fact, a write off at this juncture, it was thought, may well jeopardise the assessee's case before the High Court inasmuch as it may be construed as waiver on the assessee's part of its rightful claim. In fact, the assessee continued to hold five prints even beyond the period of five years because of the fact that the account was not settled. We are, therefore, not impressed by the argument of the authorities below that the amounts had either become bad in a preceding year or the loss had already been incurred. There is nothing to suggest that Smt. Kolammal, proprietrix of Saraswati Pictur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s later than the end of the accounting year makes no sense because the decision to withdraw the appeal was obviously taken before the end of the accounting year. It is, therefore, clear that the amount is admissible as a bad debt. Even the other argument of the assessee that it is allowable as a trading loss is well-founded notwithstanding the reliance of the learned departmental representative on the case of CIT v. Coimbatore Pictures (P.) Ltd. In that case the transaction appears to be an isolated one, unlike the present case where there were numerous such transactions. We also find that it is the custom in this line of business to pay the minimum guarantee amount as advance. The payment was contractual one and the distinction sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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