9911796707
TMI Blog2012 (10) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in the assessment order are that the assessee is carrying on the business of production of TV serials. It has been producing documentaries in the nature of clippings or film documentaries. Certain pilot projects are also undertaken. These clippings and documentaries have archival value, which can be used in future. In this year, the assessee has estimated the present value of such clippings or documentaries. The result is that intangible assets have been enhanced in value by an amount of Rs. 3,19,95,873/-. A corresponding capital reserve of equivalent amount has also been created. This amount has been shown as current assets in the balance-sheet under the head media library. However, the profit has not been increased by the corresponding amount. The assessee was required to state as to why the amount should not be added to the income. It was submitted that the assessee estimated potential value of clippings, recording etc. at Rs. 3,19,95,890/. This amount has been credited to the capital reserve. The AO considered the facts of the case and submissions made before him. It has been mentioned that recording of correct value of the stock is necessary for determining the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture relating to production has been accounted for. Therefore, it cannot be said that the clippings, unused portions of the serials, which have been termed as scrap, have no monetary value. Accordingly, it has been held that the stock of this year has not been enhanced by an amount of Rs. 3,19,95,890/-. Thus, this addition has been sustained. 2.4 The ld. CIT(Appeals) also took an alternative argument for sustaining the aforesaid decision. It has been the claim of the assessee that media library is a capital asset and if there is an addition thereto, no addition can be made in the hands of the assessee. However, this argument is required to be rejected because in respect of any addition to an asset, either of revenue or capital nature, the assessee has to furnish explanation as to nature and source of investment. The assessee has not furnished any explanation. Therefore, the addition can also be sustained u/s 69B of the Act. 2.5 Before us, the ld. counsel submitted that the assessee has been carrying on the business of producing motion pictures by way of documentaries etc. In this year, the assessee revised the value of stock-in-trade by an amount of Rs. 3,19,95,890/-. A correspo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In last year the assessee's stand was that the value of four items, capitalized in that year, was nil, but in this year he wants to take the value at Rs. 3,19,95,890/-. This shows that the stock was being under-valued in respect of these items consistently till last year. Its value has been estimated in this year. These items are not of capital nature but of the nature of stock-in-trade as the assessee is in the business of producing documentaries, films etc. Therefore, this amount is required to be taxed in the hands of the assessee in this year. Alternatively, his suggestion was that if the stock was under-valued in earlier years, the AO may be directed to reopen those assessments and bring to tax such under-valuation to tax in corresponding years. He also relies on the order of the ld. CIT(Appeals). 2.7 We have considered the facts of the case and submissions made before us. The assessee was in possession of certain pilot projects, children films, Jataka stories and some other films under co-production. As these items were not sellable, their values have been taken to be nil till last year. However, these items were valued at Rs. 3,19,95,890/- in this year. A separate class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items. The ostensible purpose is to window-dress the balance-sheet, not a laudable purpose but a purpose tainted with immorality of getting higher loan with no corresponding security. Therefore, even if re-valuation may not per se lead to generation of income, we cannot approve the entries made in the books of account in this behalf, which also have tax implication in future, namely, that the business profit shall become taxable under the head 'capital gains'. Accordingly, it is held that the re-classification of the assets and the value placed thereon in the books will have no consequence as far as income tax assessments are concerned. In other words, the assets for the purpose of income-tax shall continue to be grouped as stock-in-trade at nil value. Since no value has been realized in respect of this stock-in-trade, we are also of the view that nothing can be taxed in this behalf in this year. 2.9 Thus, ground nos. 1 and 2 are allowed as discussed above. 3. Ground no. 3 is that the ld. CIT(Appeals) erred in confirming the disallowance of Rs. 11,96,173/-, the amount written off by the assessee in the books. 3.1 In this connection, it is mentioned in the assessment order that ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
