TaxTMI 
TaxTMI 
2015 (9) TMI 1237
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....at the assessee has claimed as expenses incurred towards new projects (VCL H.O) of Rs. 7,75,04,457, (RGV H.O) Rs. 1,62,94,834 and Rs. 3,07,26,744 towards the cost of production of film 'Shabari'. Similarly, he observed that the assessee has offered income of Rs. 29,508 and Rs. 16,45,984 from VCL HO. He, therefore, observed that there is no co-relation between the huge expenditure booked under the expenses for the new projects (VCL HO) and RGV HO and the incomes reported against the same heads which are very meagre amounts of Rs. 29,508 and Rs. 16,45,984. He observed that unless the expenditure related to the incomes from pictures which are released in the year under consideration, neither income, nor expenditure can be reported as per the provisions of Rule 9A of the I.T. Act. He observed that during the relevant period, the only pictures of the assessee which were released are Sholay on 31.08.2007, Badla alias Darling on 7.9.2007 and Shiva on 15.09.2007. Therefore, according to him, except the income and the expenditure pertaining to these three films, nothing else can enter the profit & loss a/c under the provisions of Rule 9A of the Act. He, therefore, asked the assessee to show....
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.... abandoned projects as well as the movie 'Shabari' have been furnished before the AO and the CIT (A) but the authorities below have erroneously held that the assessee has not filed the details. He submitted that where all the details of the movie 'Shabari' were before the AO and the CIT (A) and the assessee also satisfies the conditions mentioned under Rule 9A, there was no occasion for the CIT (A) to remand the issue back to the file of the AO for re-verification. Thus, according to him the order of the CIT (A) is erroneous and therefore, according to him the orders of the authorities below are to be set aside. 5. The learned DR, on the other hand, supported the orders of the orders of the authorities below and submitted that the burden is on the assessee to prove that the assessee has incurred the expenditure wholly and exclusively for the purpose of the business and since the assessee has failed to substantiate his claim, the authorities below are justified in making the disallowances. 6. Having regard to the rival contentions and the material on record, we find that the disallowances made by the AO are of the expenses incurred by the assessee on two abandoned projects and als....
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....and sells the rights of exhibition of the film in respect of all or some of the remaining areas, and the film is released for exhibition on a commercial basis at least 30[ninety] days before the end of such previous year, the entire cost of production of the film shall be allowed as a deduction in computing the profits and gains of such previous year. (3) Where a 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) himself exhibits the film on a commercial basis in all or some of the areas; or (b) sells the rights of exhibition of the film in respect of some of the areas; or (c) himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas, and the film is not released for exhibition on a commercial basis at least [ninety] days before the end of such previous year, the cost of production of the film in so far as it does not exceed the amount realised by the film producer by exhibiting the film on a commercial basis or the amount for which the rights of exhibition are sold or, as the ....
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....vered by the provisions of this rule; or [(b)] having regard to the facts and circumstances of any case, it is not practicable to apply the provisions of this rule to such case, deduction in respect of the cost of production of the film may be allowed by the [Assessing Officer] in such other manner as he may deem suitable. [(7)] For the purposes of this rule,- (i) the sale of the rights of exhibition of a feature film includes the lease of such rights or their transfer on a minimum guarantee basis; (ii) the rights of exhibition of a feature film shall be deemed to have been sold only on the date when the positive prints of the film are delivered by the film producer to the purchaser of such rights or where in terms of the agreement between the film producer and the film distributor as defined in rule 9B, the positive prints are to be made by the film distributor, the date on which the negative of the film is delivered by the film producer to the film distributor". 7. On a bare perusal of the above Rule, we find that the said Rule is applicable to computation of income on the films released after certification by the Board of Film Censors. In the case before us, the ex....
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....oss of Rs. 2,09,98,862 to the next previous year i.e. F.Y. 2008-09 (AY 2009-10). I also agree with the contentions of the appellant that as per section 70, it was entitled to set off loss of any source against income from any other source under the same head and the appellant was correct in set off of balance loss of Rs. 87,46,787 of P-6 against the profit of film 'Chandamama' (P-5) of Rs. 51,00,888." However, though, the CIT(A) may be correct in holding that expenditure towards positive prints and advertisement cannot be considered towards cost of production as per Rule 9A, he has failed to examine assessee's claim u/s 37(1) of the Act. In this context, it is to be noted that Hon'ble Madras High Court in case of CIT Vs. Prasad Productions Pvt. Ltd. (supra) has held that even if expenditure relating to positive prints etc., is not allowable under rule 9A, but, the same can be allowed u/s 37(1) of the Act, as it is incurred in connection with the business. The relevant observation of the High Court is extracted hereunder for convenience: "9. Only during the course of the pendency of the appeal before the AAC, the assessee exercised an option as per r. 9A of the....
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....ed considerable reliance upon the decision in CIT vs. Carborundum Universal Ltd. (supra), we are of the view that that decision does not in any manner assist the Revenue. In that case, the assessee claimed deduction of a certain amount in the computation of its profits and gains of the business by way of contribution to the superannuation fund of its foreign collaborators and that claim was disallowed by the authorities below. However, the Tribunal held that though that amount was not an allowable deduction under s. 36(1)(iv) of the Act as the contribution was not to a recognized provident fund or to an approved superannuation fund nor could be allowed under s. 37 of the Act, the payment was allowable under s. 28 of the Act. On a reference, it was held that the nature of payment being one described in s. 36(1)(iv) of the Act and as it could not be deducted under that section, it cannot be held to be deductible under s. 28 of the Act on general principles in arriving at the true profits and gains of the business in a commercial sense. In the view we have taken that the expenditure incurred in connection with the obtaining of positive prints is really in the nature of post-production....