Court rules on weighted deduction for publicity materials and disallowance of print costs; transit print value as income.

The court ruled in favor of the assessee regarding the entitlement to weighted deduction for publicity materials but upheld the disallowance of deduction for the cost of positive prints. Additionally, the court determined that the sum representing the value of prints in transit should be treated as income for the relevant assessment year.

---

---

Issues:
1. Entitlement to weighted deduction under section 35B for publicity materials and positive prints.
2. Treatment of the sum representing the value of prints as income.

Entitlement to weighted deduction under section 35B for publicity materials and positive prints:
The court deliberated on whether the assessee, involved in film production and distribution, was eligible for weighted deduction under section 35B for expenses related to publicity materials and positive prints. The Tribunal had allowed the deduction for publicity materials sent abroad by the assessee, considering them as part of advertisement or publicity outside India. The court upheld this decision, emphasizing that the materials were supplied by the assessee and used for promoting the film overseas. However, the deduction for the cost of positive prints was disallowed by the Tribunal. The court agreed with this disallowance, stating that positive prints, being physical goods necessary for film exhibition outside India, did not fall under the purview of section 35B as it pertains to expenditure on distribution, supply, or provision of goods outside India, not the cost of the goods themselves.

Treatment of the sum representing the value of prints as income:
The court addressed the issue of whether a sum of Rs.60,000, representing the value of four prints in transit to a distributor, should be treated as income for the relevant assessment year. The assessee, following the mercantile system, had not received payment for the prints by the year-end. Despite this, the court held that the income had accrued to the assessee, and thus, the value of the prints should be considered as part of the assessee's income for the assessment year 1980-81. Consequently, the court answered the questions referred by the Revenue in favor of the assessee, except for the treatment of positive prints as capital expenditure, which was deemed correct.

In conclusion, the court ruled in favor of the assessee regarding the entitlement to weighted deduction for publicity materials but upheld the disallowance of deduction for the cost of positive prints. Additionally, the court determined that the sum representing the value of prints in transit should be treated as income for the relevant assessment year.

---