TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 164
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....made by the Assessing Officer (AO). ITA no.1807/Del/2013 is an appeal by the Revenue against the penalty deleted by the Ld.CIT(A). 2. Facts in brief:- The assessee is in the business of distribution of films and songs. During the Assessment Year the assessee filed her return of income declaring income of Rs. 61,11,621/-. The Assessing Officer (AO) completed the assessment u/s 143(3) of the Income Tax Act 1961 (the Act) vide order dated 23.12.2009 inter alia making an addition of Rs. 55, 28,571/-. The addition is on the recognition of income in respect to the sale of rights in certain films by the assessee by way of an agreement for the period of seven years. The assessee, on the ground that, the agreement is for the period of seven years, ....
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....ver, as per terms and conditions of agreements entered with the buyer, not only the assigned rights remain with the buyer but the cinematographic prints of the film also remain with buyer. Accordingly, during the agreed/assigned period assessee cannot hold films and can not raise any further revenue. (iii) There was a mistake while preparing the Profit & Loss A/c regarding the claim of deduction on account of expenditure incurred by the assessee in purchasing these film rights. In the case of film distributor or Subdistributor, the deduction of expenditure incurred on purchase of exhibition/distribution rights is governed by a Special Rule i.e. Rule 9B of Income Tax Rule 1962. Though, in the accounts the deduction was shown as depreciatio....
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....te in respect of assigned films. The effective date for all the 3 films assigned to M/s Prime Focus Limited is beyond 31.03.2007 therefore, no part of sale proceeds should relate to the current year. However against this, the assessee has recognized an amount of Rs. 6,21,428.57 (1/7th of total consideration of Rs. 43,50,000/-) as income of the AY 2007-2008. Similar explanation has been given for the films assigned to M/s Indus Video Pvt. Ltd. The assessee has also explained that she has recognised the income pro-rata. 2.3. The AO did not accept the contention of the assessee. He held that on one hand the assessee is claiming deduction of the whole expenditure on the acquisition of rights, which period of assignment is more than one year. ....
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....se laws cited, we hold as follows. 7. In our considered opinion the A.O. was in error in his conclusions that, whenever Rule 9B is applied for claims of expenditure, the income should also be accounted for and offered to tax in the year of receipt. Rule 9B of the Income Tax Rules, 1962 is a special rule which provides for claims of deduction in respect of expenditure, in respect of distribution of films. The Income Tax Act or Rules have not provided for any special manner in which income in such cases have to be taxed. Thus the general law prevails. Coming to the accrual of income, we find that the assessee has offered this income for the next subsequent six A.Ys i.e. A. Y. 2008-09 to 2012-13 at the rate of Rs. 9,21,428/- at prorate basis....
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....e year in which it is incurred It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year Thus in the case of Hindustan Aluminium Corporation Ltd Vs CIT [1983] 144 ITR 474, the Calcutta High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question Issuing debentu....