1988 (11) TMI 137

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... for distribution, two films (1) Thief of Bagdad and (2) Paapi. The producers of the second film is M/s. Ralhan Productions. The agreement with the assessee is dated 3rd Aug. 1977. In that agreement, Ralhan Productions is described as the principal and the assessee as the agent. The agents i.e. the assessee have to pay the principal a total sum of Rs. 4,04,444 by way of minimum guarantee. In addition to the above minimum guarantee, the distributors i.e. the assessee should further spend a collective sum of Rs. 50,000 on pre-release and release publicity of the said picture on the producer's account. It would appear that the assessees should give an estimate of such publicity expenses in advance for approval and after obtaining the approval ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....blicity expenses of the above picture in your circuit : Rs. 4,35,000-00 Total : Rupees Four lakhs thirty five thousand only. ----------------------------- 4. As a matter of fact, the assessee incurred publicity expenditure of Rs. 34,227 as against the budgeted amount of Rs. 50,000 in the case of Paapi. In the other case of Thief of Bagdad as against the budgeted amount of Rs. 60,000, the assessee had spent only Rs. 14,613. Thus, there is surplus left with the assessee of Rs. 15,773 in the case of Paapi and Rs. 45,387 in the case of Thief of Bagdad. The Income-tax Officer brought both these items to tax. 5. Against these findings, the assessee went on appeal. The Commissioner (Appeals) found that factually the assessee has not in....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....doubt true that the publicity expenditure as envisaged by the contracting parties was going to be a part of the cost of the acquisition of the distribution rights. The cost, however, of all these rights are to be met in two different ways. The amounts other than the publicity expenditure has to be paid in cash by the assessee to the producer's. Thus, in the case of Paapi, the assessee has to pay in cash out of the collections Rs. 4,04,444. Apart from this, the assessee has also to incur on behalf of the Producer's expenditure for publicity. The producers have agreed that such expenses would be to the extent of Rs. 50,000 in the case of Paapi. To this extent, the assessee can reimburse himself from the collections. While reporting to the Pro....