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TMI Blog2015 (10) TMI 2253X X X X Extracts X X X X X X X X Extracts X X X X ..... ited for more than 90 days before the end of previous year, the entire cost of acquisition of the film shall be allowed as a deduction while computing the profits and gains of such previous year. In this case M/s Sohail Khan sold the rights to the assessee in certain areas and undisputedly film has been released on commercial basis atleast for 90 days before the end of the previous, so the entire amount of acquisition shall be deducted in computing the profits and gains of such previous year. CIT(A) was not justified in making the disallowance of ₹ 1,35,75,000/- because calculation of loss in the release of film by a distributor for the purpose of distribution to be done, as per Rule 9-B of the Rule. The provisions of section 9B of the I.T. Rules are applicable to the assessee as the film was released on 10-9-2004 which is 90 days prior to 31st March, 2005 and the total cost incurred including cost of print and publicity is ₹ 2,39,30,039/-. After deducting the revenue realized, the net loss from the film of ₹ 84,021,740/- (Rs. 1,55,27,299/- (-) ₹ 2,39,30,039/-) was rightly debited in the P&L Account. - Decided in favour of assessee. - ITA No. 1848/Mum/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs, the Assessing Officer observed that minimum guarantee amount of ₹ 1,81,00,000/- was paid to M/s Sohail Khan Distribution and it had debited ₹ 84,02,740/- to its profit and loss account towards loss on exhibition of the film Dil Ne Jise Apna Kaha . The assessee had acquired intangible asset in the form of distribution rights of the said film for a period of five years. The receipts from the said film were spread for five years and the entire receipts were not received by the assessee in the previous year under consideration. According to the Assessing Officer as per the provisions of section 32(1)(ii) read with Rule 5 of the Income Tax Rules, 1962, the distribution rights being intangible asset is eligible for depreciation @ 25% only and not the entire expenses incurred, hence, an amount of ₹ 45,25,000/- only (25% of ₹ 1,81,00,000/-) was allowed as deduction towards payments of minimum guarantee of ₹ 1,81,00,000/- out of ₹ 1,35,75,000/- was disallowed and added back to the total income of the assessee. The matter carried before the first appellate authority who after considering the submissions of the assessee confirmed the order of the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 1962. The income was correctly assessed u/s. 143(3) and the reassessment proceedings commenced was bad in law and that too based on Audit Objections. Therefore the CIT(A) ought to have held the reopening bad in law. Finally, he submitted that the additions made is required to be deleted because that has happened due to incorrect application of provision of Income Tax Act, 1961 read with Rule 9B of the Income Tax Rules, 1962. On the other hand, the ld. D.R. strongly supported the orders of authorities below. 5. After having considered the rival submissions and perusing the material available on record, we find that the assessee is in the business of distribution of films in Bombay Circuit which encompasses areas of Maharashtra, Gujarat, Goa and partly Karnataka. During the year under consideration, the assessee acquired distribution rights of Bombay Circuit of the film Dil Ne Jise Apna Kaha for a period of five years from M/s Sohail Khan Production for a consideration of ₹ 1.81 crores. The above film was released for exhibition on 10-09-2004. Meantime, the assessee incurred expenses for on-print and publicity etc. of ₹ 58,30,039/-. Thus the assessee incurred tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired depreciation @ 25% has to be allowed. On reopening of assessment u/s 148 of the Act, during the hearing the assessee filed letters, inter alia, stated that the assessment was done in the case of the assessee u/s 143(3) of the Act was correct in law and invoking of section 147 is unlawful. However, the Assessing Officer decided to allow depreciation @25% on the cost of acquisition of film of ₹ 1.81 crores i.e ₹ 45,25,000/- and disallowed a sum of ₹ 1,35,75,000/- (Rs. 1,81,00,000/(-) ₹ 45,25,000/-) and added to the total income determining the total income at ₹ 98,13,370/- instead of loss returned at ₹ 37,61,626/-. 6. The first issue before us is invocation of provisions of section 147 which deals with escapement of income due to failure on the part of the assessee to file the TDS. In the return of income filed, the assessee has shown the transactions of the film Dil Ne Jise Apna Kaha which resulted into loss and such loss was calculated as per the provisions of Rule 9B of the I.T. Rules, 1962. The Assessing Officer duly satisfied and accepted the returned loss and assessed assessee to same figure of loss. The Audit party was of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and gains of such previous year or the film distributor himself exhibits the film on a commercial basis in all or some of the areas or sells the rights of exhibition of the film in respect of some of the areas or himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film on respect of all or some of the remaining areas. In this case, as stated M/s Sohail Khan Distribution has given rights of distribution to the assessee. In such situation, film was released on commercial basis and exhibited for more than 90 days before the end of previous year, the entire cost of acquisition of the film shall be allowed as a deduction while computing the profits and gains of such previous year. In this case M/s Sohail Khan sold the rights to the assessee in certain areas and undisputedly film has been released on commercial basis atleast for 90 days before the end of the previous, so the entire amount of acquisition shall be deducted in computing the profits and gains of such previous year. In view of our above discussion, the CIT(A) was not justified in making the disallowance of ₹ 1,35,75,000/- because calculation of loss in the release ..... X X X X Extracts X X X X X X X X Extracts X X X X
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