2003 (1) TMI 64

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....d (11) of rule 9A of the Income-tax rules, rejecting the assessee's valuation based upon realisation in the market? (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in deleting the disallowance of Rs. 57,587, the amount spent for publicity expenses, holding that the business of film production is and industrial undertaking falling under section 37(3D) ?" Facts: In this reference, we are concerned with the accounting year ending March 31, 1979, corresponding to the assessment year 1979-80. The assessee was engaged in the business of film production. During the relevant accounting year, the assessee produced a movie. The distribution right was granted by the assessee on minimum guarantee basis for diff....

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....t of expenditure on production of movies. It lays down that in computing the profits and gains of business of production of movies carried on by a film producer, the deduction in respect of the cost of the movie shall be allowed. Under the Explanation to rule 9A, cost of production is defined to mean expenditure incurred on the production of the movie. Under sub-rule (5), it is, inter alia, provided that where the film producer exhibits the film on a commercial basis in the territories specified in the table given in rule 9A, the entire cost of production shall be allowed as a deduction in computing the profits of the given previous year. There is an Explanation to sub-rule (5). It, inter alia, provides for writing off of the cost of produc....

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....oducer declared total realisation of Rs. 32,90,962. The distribution rights of the movie were not sold by the producer for the territories of Andhra Pradesh, Tamil Nadu, Kerala and East Punjab. Therefore, the assessee declared the value of the closing stock at Rs. 1.45 lakhs. There is nothing to indicate as to how this amount was arrived at. Be that as it may, the Income-tax Officer applied the table for respective territories referred to above. The territories of Andhra Pradesh, Tamil Nadu, Kerala and East Punjab came under territory "D", "J" and "K" for which the rates were 8 per cent., 2.5 per cent. and 3 per cent,. respectively, in all amounting to 13.5 per cent. As per the order of the Assessing Officer, the total cost of the movie as ....