9911796707
TMI Blog1960 (2) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... y, for which the assessee family had a first charge over the assets of the company including the films. The company went into voluntary liquidation in 1939. The assessee took over a number of films from the company at a valuation in partial discharge of the debt due from the company to the assessee. The assessee wrote off the unrecovered balance as a bad debt, and that claim was allowed by the Income-tax Department in assessing the assessee from its profits in its money-lending business. One of the films so taken over was a Tamil picture Mohini Rukmangada. Even in 1938, that is before the company went into voluntary liquidation, one Kameswara Rao of Rajahmundry filed a suit against the company, complaining that a portion of the film Mohin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the account year nor treated as an expenditure incurred wholly and exclusively for the purpose of the business of exhibiting the films. The disallowance was in order. It is upheld. The assessee appealed to the Tribunal. The Tribunal was of the view that the payment to Kameswara Rao constituted an item of capital expenditure. The Tribunal further held that even if it was a revenue expenditure, it was not a charge on the year's income as there was no income from the film in question in the year of account. The Tribunal also stated: The Appellate Assistant Commissioner had appreciated the position correctly in paragraph 5 of the order and we are in agreement with it. It is against this background we have no answer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessee's claim was that the payment in question was compensation for a wrongful act. Elaborate arguments were addressed to us by the learned counsel for the assessee that the payment in question should not be viewed as a payment by why of penalty for a breach of law. The learned counsel pointed out that though Kameswara Rao complained of an infringement of a copyright, that the claim was never determined by the court. The claim was settled out of court by a compromise on payment of ₹ 5,260 by the assessee to Kameswara Rao. Apart from the fact, that there is no allegation that the assessee himself had infringed the copyright of Kameswara Rao--the allegation was that it was the company that had infringed the copyright--what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the managing director of the company, and obviously he should have been aware of the pendency of Kameswara Rao's claim when the family took over, among others, the film in question Mohini Rukmangada. There was thus material on which the Assistant Commissioner could rest his conclusion, that when the assessee took over Mohini Rukmangada, the known factor, that there was a claim against the company, should have been taken into account in fixing the value of the film, by providing for a possible payment to be made by the assessee after the film was taken over. If, for example, the film had been worth ₹ 10,000 and was valued at about ₹ 5,000, with the liability to pay ₹ 5,000 or more in future to Kameswara Rao, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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