TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 1042
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....come for the assessment year 2009-10 on September 30, 2009 declaring income of Rs. 1,40,59,210. The return of the assessee was processed under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Subsequently, the assessee filed revised return of income on March 24, 2011 declaring total income as Rs. 1,33,59,740. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued to the assessee on August 23, 2010. During scrutiny assessment proceedings, the Assessing Officer observed that the assessee has shown a sum of Rs. 39.13 crores realised from Tamil feature film "Kuselan" and Telugu film "Kathanayakudu". The assessee had sold both films outright to M/s. Kavithalaya P....
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....of Rs. 1.50 crores was neither shown as receipts in the profit and loss account nor claimed as expenditure. The said amount is treated as reimbursement to M/s. Pyramid Saimira Entertainment Ltd., to compensate huge loss suffered on dismal performance of the films "Kuselan" and "Kathanayakudu" in the States of Tamil Nadu, Andhra Pradesh and Karnataka. The assessee has further contended that the said amount paid is not a "goodwill" but a "goodwill gesture". The Assessing Officer held that the said payment is not revenue expenditure and is thus not allowable as expenditure under section 37 of the Act and disallowed the same. Apart from the aforesaid disallowance, the Assessing Officer made disallowance of bad debts, disallowance of depreciatio....
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....ount is not tenable. The learned Departmental representative further pointed out that initially there were agreements dated February 16, 2008 between the assessee and M/s. Kavithalaya Productions P. Ltd. and M/s. Vyjayanthi Movies. Thereafter, on July 28, 2008 the assessee entered supplementary agreement with the respective parties. In none of the agreements, there is any mention of M/s. Pyramid Saimira Entertainment Ltd. The rights of the films were assigned to M/s. Kavithalaya Productions P. Ltd. and M/s. Vyjayanthi Movies for consideration. M/s. Pyramid Saimira Entertainment Ltd. has no locus standi. The learned Departmental representative further submitted that the expenditure incurred by the assessee is non-recurring in nature. The pay....
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....atre owners. The amount has been disbursed to the exhibitors through M/s. Pyramid Saimira Entertainment Ltd. 5. We have heard the submissions made by the representatives of both sides and have perused the orders of the authorities below. The facts narrated hereinabove have not been disputed by either sides. The only dispute in the present appeal is with regard to the nature of payment made by the assessee to M/s. Pyramid Saimira Entertainment Ltd. The assessee has claimed Rs. 1.50 crores as revenue in nature whereas the Revenue has classified the payment as capital. The assessee has not shown the said payment in its profit and loss account as expenditure. The assessee has reduced the amount from receipts. The Commissioner of Income-tax (Ap....
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....by relying on certain decisions. As per the contentions of the assessee, since the payment is in the form of goodwill gesture, it is revenue in nature. In our considered opinion the assessee made the said payments to protect its goodwill in the market. The assessee has to operate and do business in the market in future as well, the assessee had to maintain its goodwill. The assessee has not been able to show from the agreements dated February 16, 2008 or supplementary agreement dated July 28, 2008 that the said payment is made in accordance with the covenants of agreement. A perusal of records, as well as the assessee's own admission make it absolutely clear that the payment was not made to discharge any legal liability. The payment was....