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TMI Blog1983 (1) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to the profit and loss account till the collections made cover the cost of acquisition. In one of the pictures ' Vardan ', the cost of acquisition was Rs. 2.85 lakhs. The realization up to the end of the accounting year was Rs. 2,38,377. There was a deficit of Rs. 46,622. This was not brought to the profits and loss account but was carried forward to the next year. As it happened during the accounting year, the six pictures acquired by the assessee cost them more than the collections made up to the end of the year. In accordance with the method of accounting followed, all the deficits were carried forward to the next year. In the accounts for the following year, the excess realised was credited to the profit and loss account. Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levelled off in the subsequent years. 5. Against this finding, the department is in appeal before us. Shri Joy, the departmental representative, submitted that the amortisation to be allowed to the films had to be according to the circular issued which was in existence during the accounting year. The accounting year being the calendar year 1975, the circular of 5-12-1974 was applicable. The ITO had allowed amortisation strictly according to the circular and, therefore, his order should be restored. He also submitted that the application of the circular has been approved in a similar case by the Special Bench of the Tribunal in the case of Rajshree Productions (P.) Ltd., vide its decision in IT Reference No. 441 (Bom.) of 1976-77 dated 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the valuation of the closing stock is made in the ground of appeal. Our considered opinion is that the right cannot be in the nature of stock-in trade. The first case is the decision of the Bombay High Court in the case of CIT v. Patel International Film Ltd. [1976] 102 ITR 219. In that case, the assessee had purchased a film for Rs. 60,000. The film did not succeed in the box office and the assessee had claimed heavy amortisation charge. The ITO rejected the assessee's claim on the ground that the acquisition of the film was not a commercial transaction at all. The Tribunal made an observation that the film was not the stock-in-trade of the assessee. At page 224 there are observations of the High Court which would show that a film of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. There also, the books are hired out on a fee or charge. In both cases, they are the capital assets. 10. The same principle should apply in the assessee's case before us. The assessee has acquired rights of distribution of the films. He has been given several prints of the same. These prints are hired out to the various exhibitors and sub-distributors. The assessee's business is to get a percent age of the collections from the exhibition of these prints. This is akin to the hire charge in the case of the car or library books. 11. On the finding that the assessee had acquired a capital asset, the question next is how this asset would be exhibited in the accounts. In this connection, we must note that the capital asset of the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o bring his case within the Income-tax Rules and the schedules, in respect of the terminal allowance under section 32(1)(iii), it is not necessary. This section allows the assessee a deduction of the difference in value between the cost or the written down value and the scrap value. The only condition is that the asset should be a building, machinery, plant or furniture and, further, it should be sold, discarded, demolished or destroyed. As far as the first condition is concerned, in view of the various decisions starting from CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672, it is easy to hold that the distribution rights consisting of various prints of the films are plant. The second condition is also satisfied if we keep in view that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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