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TMI Blog2020 (11) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... that the audio matter cannot be viewed separately distinct from the feature film, since it is intricately connected with the feature film. There should not be any dispute that, in the Indian film scenario, songs form integral part of the feature film and many a times, many films turned out to be successful due to songs. Public at large could visualise the film scenes on hearing the songs. Hence, it was made possible to assign the audio rights of films/songs separately. Hence, we are of the view that sale of audio rights should form part of amount realised on exhibition of films on commercial basis. Accordingly, we are of the view that the amount realised on sale of audio rights and TV rights would fall under the category of exhibition of film on a commercial basis - See VIESHESH FILMS (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 29, MUMBAI [ 2008 (8) TMI 600 - ITAT MUMBAI] We hold that the amount realised by the assessee on sale of audio rights and TV rights of the film would fall under the category of exhibition of films on a commercial basis . Accordingly, we direct the AO to allow deduction of expenditure incurred on production against the above said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on 13.1.2014 and hence the period of release during the previous year relevant to the assessment year 2014-15 was less than 90 days. Hence the assessee availed the benefit of Rule 9A(3)(c) of I T Rules. Accordingly, the assessee set off the production expenditure against gross receipts of ₹ 11,15,10,756/- (referred above) and carried forward remaining unclaimed expenditure of ₹ 3,79,78,857/- to next year. 3. The A.O. noticed that, as per Rule 9A(3)(c) of I.T. Rules, the expenditure on production of film should be restricted to the amount realised by the film producer by exhibiting the film on commercial basis or selling the rights of exhibition of the film. In the instant case, the A.O. noticed that the assessee did not sell rights of exhibition of film in any area. The A.O. noticed that the assessee has included the receipts from sale of audio rights and T.V. rights also in computing the amount realised from exhibition or sale of rights of exhibition. The A.O. took the view that the expression amount realised from exhibition of film on a commercial basis used in Rule 9A(3)(c) should not be construed to include all receipts from film such as sale of audio rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts and audio rights cannot be said to be in relation to the area not covered by (i) as above such rights will overlap with area covered by (i), i.e., where the film producer himself chooses to exhibit film on a commercial basis, as such TV rights and Audio rights allow the buyer to exercise such rights in such geographical areas where the appellant has himself exhibited the film in theatres. 6. Before Ld. CIT(A) the assessee placed reliance on the decision rendered by Mumbai bench of ITAT in the case of Vieshesh Films (P) Ltd. Vs. DCIT (2008) 26 SOT 64 (Mum) and also the decision rendered by Hon ble Supreme Court in the case of M/s. Laxmi Video Theatres and others Vs. State of Haryana and Others (1993) 3 SCC 715. The Ld CIT(A), however, held that these decisions are not applicable to the facts of the case. The observations made by Ld CIT(A) are extracted below:- 4.6 In addition to above, the Rule 9A(7)(ii) provides that the right of exhibition of a feature film shall be deemed to have been sold only on the date when the positive prints of the film are delivered by the film producer to the purchaser of such rights. In case of sale of T.V. rights and audio rights, no such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that VCR/VCP were being used for public screening of the films. In the case under consideration, the sale of T.V rights and audio rights in itself do not amount to public screening as the majority of viewership would be confined to homes. Even if the purchaser resorts to public exhibition of the film on T.V., the sale consideration cannot be considered to be relating to the same alone. In absence of any such specific details in the agreement, the entire consideration has to be considered for general viewership of the T.V., which is at home. Accordingly, the Ld CIT(A) confirmed the order passed by AO and hence the assessee is in appeal before us. 7. The Ld A.R submitted that the phrase exhibition of films on commercial basis should not be restricted to traditional method of exhibition in theatres. He submitted that the technological change and advancement has made exhibition of films possible in different modes/mediums. Hence the meaning of above said phrase should be extended to all possible modes/mediums as per technological advancement, as the ultimate purpose of exhibition of films is to reach it for public at large viewing. He submitted that this aspect of techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the advertisement of the film after it is certified for release by the Board of Film Censors:] [ Provided that the cost of production of a feature film, shall be reduced by the subsidy received by the film producer under any scheme framed by the Government, where such amount of subsidy has not been included in computing the total income of the assessee for any assessment year.] (2) Where a [***] feature film is certified for release by the Board of Film Censors in any previous year and in such previous year,- (a) the film producer sells all rights of exhibition of the film, the entire cost of production of the film shall be allowed as a deduction in computing the profits and gains of such previous year; or (b) the film producer- (i) himself exhibits the film on a commercial basis in all or some of the areas; or (ii) sells the rights of exhibition of the film in respect of some of the areas; or (iii) himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas, and the film is released for exhibition on a commercial basis at least [ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sette by way of VCR/VCP would be covered by Punjab Cinemas (Regulation) Act, 1952. It was held as under by Hon ble Supreme Court:- 7. We are in agreement with this view. The definition of the expression cinematograph contained in Section 2(c) of the Cinematograph Act, 1952 and Section 2(a) of the Act is an inclusive definition which includes any apparatus for representation of moving pictures or series of pictures. The said definition cannot be confined in its application to an apparatus for representation of moving pictures or series of pictures which was known on the date of the enactment of the said provision. It must be given a meaning which takes into account the subsequent scientific developments in thefield in accordance with principle of statutory construction laid down in Senior Electric Inspector v. Laxmi Narayan Chopra . In that case it has been held- [I]n a modern progressive society it would be unreasonable to confine the intention of a Legislature to the meaning attributable to the word used at the time the law was made, for a modern Legislature making laws to govern a society which is fast moving must be presumed to be aware of an enlarged meaning the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer can sell the rights of exhibition of film in respect of all or some of the remaining areas , despite he himself exhibits the film on a commercial basis. The use of word all would show that there is no area restriction as observed by Ld CIT(A), i.e., it is the commercial convenience of the parties concerned. Hence the main thrust should be on exhibition of film on a commercial basis . Further, due to technical advancement, it is now possible to sell audio rights separately apart from exhibition of feature films. Audio matter is part of feature film and is part of production of feature film. Nowadays, both audio video form integral part of a feature film. In fact, a feature film without audio is rarest of rare feature. The cost of production of feature film includes expenditure on audio recording. Hence, we are of the view that the audio matter cannot be viewed separately distinct from the feature film, since it is intricately connected with the feature film. There should not be any dispute that, in the Indian film scenario, songs form integral part of the feature film and many a times, many films turned out to be successful due to songs. Public at large could vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied for release by Board of Film Censor in a previous year, cost of production of such film was to be allowed in accordance with the provisions of sub-rule (2) to sub-rule (4) of Rule 9A, hence, the assessee's case was to be examined in accordance with these provisions. Thereafter, the ld. CIT(A) examined the Agreement dated 23-2-1999 entered into by the assessee with M/s. Essel Vision whereby TV Satellite broadcast rights and pay TV rights were given for Asia region. However, as per the 2nd Agreement dated 21-4-1999, the world rights were given to Essel Vision. The ld. CIT(A) also noted that this film was approved by the Censor Board for release on 17-11-1998. Thus, after taking into consideration these facts, the ld. CIT(A) held that the assessee's case fell within the sub-clause (b) of sub-rule (3) of Rule 9A. The ld. CIT(A) also rejected the contention of the assessee regarding impact on realization after the film was shown on TV because Rule 9A provided for deduction of cost of production in a specific manner irrespective of assessee's discretion regarding its exhibition in various territories at various points of time. The ld. CIT(A) also confirmed the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II attached to the Assignment Agreement between the assessee and Zee Tele Film, it is noted that the Star Cast is Saif Ali Khan and Twinkle Khanna who at the relevant point of time, were not acting in the TV Serials or films made for TV telecast, hence, this fact also goes against the assessee's claims. It is also noted that the assessee has reduced cost of production of this film by ₹ 125 lakhs, however, from the Zee Tele Films, the assessee has received a consideration of ₹ 60 lakhs only and no material has been brought on record to show the source of balance ₹ 65 lakhs which may have been realized either from any other distributors or TV Telecast companies and in both the situations, the assessee's claim that it was produced exclusively for exhibition on television stands contradicted. 18. Having stated so, now we deem it fit to consider the claim of the assessee regarding application of Rule 9A of the Income-tax Rules, 1962. The Assessing Officer has held Rule 9A, was applicable because of the fact that Form 52A had been filed by the assessee and at no point of time the assessee claimed or furnished information regarding the fact that this fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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