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TMI Blog1982 (8) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... ivered the prints for the territories of Tamil Nadu and Andhra and, therefore, an amount equal to 4 per cent of the adjusted cost of production was disallowed under rule 9A of the Income-tax Rules, by him. Accordingly, he considered it as closing stock. However, he asked for the objection under section 144B of the Income-tax Act, 1961 ('the Act'), and the assessee made objection before the IAC stating that under rule 9A(c), the ITO can take a judicious view on the basis of the facts and circumstances and that in respect of the picture 'Balika Badhu' there was actually losses in certain territories and the picture has not been released in some other territories even now and this fact may be considered ; that in any case, the ITO cannot value this territory at 4 per cent ; that presumably the ITO has taken 2 1/2 per cent for Andhra and 1 1/2 per cent, i.e., half of 3 per cent for Tamil Nadu ; that it is contended that such a split is not permissible and that in respect of Tamil Nadu nothing should be valued by way of closing stock. The IAC did not accept the aforesaid contention of the assessee. Hence, he rejected it observing that the ITO has to allow that part of cost of production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, but properly speaking, rule 9A(9)(c) was applicable. Reliance was placed on the decision of the Madras High Court in the case of Gemini Pictures Circuit Ltd. v. CIT [1958] 33 ITR 547. Shri Khurana further contended that the picture 'Balika Badhu' was wholly based on a successful Bengali picture and primarily had the local background of Bengal and that the experience showed that in the South pictures with specific local background did not demand any box office ; that this picture being what could be called remake in Hindi, could not have what the South Indian box office required, viz., 'the Masala'. On hearing these arguments, the Commissioner (Appeals) found that in some appeals in the case of producers, distributors and other film personalities and on the basis of the little general knowledge he had got, he saw merit in Mr. Khurana's submission. In meeting the other arguments of Shri Khurana, he observed as under : "10. Now bearing in mind the earlier instructions of the Board on the question of amortisation of films, the leading case of the Madras High Court, viz., Gemini Pictures and the two clauses of sub-rule (9), in my understanding, what follows is that rule 9A is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reasons. Similarly, he hits the conclusion of the Commissioner (Appeals) stating that the conclusion arrived at is not on the basis of relevant reasons substantiated from the record ; rather the same is based upon the understanding or personal knowledge of the Commissioner (Appeals) and as such, his order is no order on the issue in the eyes of law. He relies upon the order of the ITO as well as on rule 9A(6)(b) of the Rules. 4. We have beard the rival contentions and gone through the record before us. The issue for determination before us is that whether the case of the assessee falls under rule 9A(6)(b) or under rule 9A(9)(a) or (c) ; because both the parties admit that the issue involved is to be determined according to rule 9A of the Rules. Rule 9A(6)(b) says as under : " 9A. (6) Where a feature film not being a regional language feature film is certified for release by the Board of Film Censors in any previous year and in such previous year, the film producer-- (a) (b) sells the rights of exhibition of the film in respect of some of the territories specified in the said Table ; the cost of production of the film to be allowed as a deduction in computing the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as a deduction Territory J : 2 1/2 Territory K : 3 Territory J consists of : Areas comprised in the districts of Anantpur, Chittoor, Cuddapah, East Godavari, Guntur, Krishna, Kurnool, Nellore, Prakasam, Srikakulam, Vishakhapatnam and West Godavari in the State of Andhra Pradesh. Territory K consists of : (a) the whole of the States of Kerala and Tamil Nadu ; (b) the whole of the Union territories of Pondicherry and Lakshadweep. Thus from rule 9A(6)(b) read with Explanation, it is more than manifest that if sale of rights of exhibition is not in respect of the territories specified in the said Table or in other words, the sale is there of the said rights merely in respect of some of the territories specified in the said Table ; then the entire cost of production of a feature film shall not be allowed as a deduction in computing the profits and gains of such previous year. If at all it is to be allowed, then in accordance with or/and 9A(9). Therefore, we also have to see the provisions of rule 9A(9) in view of the fact that Shri Khurana states that the case of the assessee falls under rule 9A(9) clause (a), if not then clause (c). Hence, we reproduce rule 9A(9) clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no question of closing stock to be taken as nil value, on the ground that there is no scope of the exhibition of the film on commercial basis in the territories of Andhra Pradesh and Tamil Nadu on the basis of paper-book and on the fact that up to date, none have offered to purchase such rights in these territories. Accordingly, we reject this contention of Shri Khurana. Apart from it, the order of the Commissioner (Appeals) cannot be sustained in view of the fact that the Commissioner (Appeals) has arrived at his conclusion on the basis of his little general knowledge and understanding which is not at all a finding ; rather it is his opinion. This opinion at the most can be taken as an expert piece of evidence and the evidence is not at all the finding on the issue raised by the party. The issue raised by the party can be decided on understanding the contention of the parties and thereto in either accepting or rejecting these on assigning cogent and relevant reasons substantiated from the material on record or by the provisions of law or decision either of the High Courts or the Supreme Court. The issues raised by the parties cannot be determined by the quasi-judicial fun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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