Revenue expenditure on settling film rights dispute was allowable as deduction where payment was made for business expediency.

Payment made to settle a co-producer's claims and remove uncertainty over rights in a film was held to be revenue expenditure. The court treated the payment as incurred after title had already vested and after the arbitral award had clarified the position, so it was not for acquiring a capital asset or perfecting title. As the settlement was entered into to resolve disputes, avoid litigation, and enable the business to be carried on more effectively, the amount was allowable as a revenue deduction.

---

---

Issues: Whether the sum of Rs. 20,101 paid to settle the claims of a co-producer and remove the cloud over the assessee's rights in the film was allowable as a revenue deduction.

Analysis: The payment was made after the assessee had already acquired title to the film under the original arrangement and after the arbitral award had clarified the position. The settlement was entered into to resolve disputes and counter-claims so that the business could be carried on without litigation and with better commercial working. On these facts, the expenditure was not for acquiring a capital asset or perfecting title, but was incurred in the course of business expediency to make the business productive of profit.

Conclusion: The amount of Rs. 20,101 was rightly treated as revenue expenditure and was allowable as a revenue deduction in favour of the assessee.

---