TaxTMI 
TaxTMI 
2020 (6) TMI 104
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.... Amount of Loss Claimed (Rs) Date of release 1 Micheal Madana Kamaraju 2,00,000 18.04.2008 2 Mithrudu 6,00,000 01.05.2009 3 Snehithudu 2,19,000 27.01.2012 4 Yamadonga 8,97,082 15.08.2007 The AO observed that Rule 9B of I.T. Rules, 1962 specifies the deduction in respect of expenditure on acquisition of distribution rights of feature films and specifies the following two conditions: (i) If the film is exhibited for more than 90 days before the end of such previous year, the entire cost of acquisition of film shall be allowed as deduction in computing the profits and gains of such previous year. (ii) If the film is not released for exhibition atleast 90 days before the end of such previous year, balance cost of acquisition of the film over and above the amount realized by the distributor, shall be carried forward to the next following previous year and the same shall be allowed as deduction in that year. He observed that in the case of the assessee, three movies on which the assessee has claimed loss, were released and exhibited on commercial basis for more than 90 days in the relevant previous years i.e. 200....
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....CIT(A) ought to have allowed the expenditure of Rs. 19,16,082/debited to Profit and Loss account under the head "Loss on Pictures" as per the provisions of section 36(1)(vii) of the Act. 3) The Ld. CIT(A) erred in not allowing the expenditure claimed of Rs. 19,16,082/- by referring to the provisions of Rule 9B of the I.T Rules, 1962. 4) The Ld. CIT(A) ought to have appreciated that the allowance of expenditure under Rule 9B of I.T. Rules, 1962 is not to be misinterpreted and used against the interests of the appellant. 5) The Ld. CIT(A) ought to have appreciated that the loss of Rs. 19,16,082/ - represents the refundable advance paid for purchase of picture-rights which had become a bad debt allowable u/ s 36(1)(vii) of the Act. 6) The Ld. CIT(A) ought to have appreciated that both the provisions of Rule 9B of the I.T. Rules, 1962 and the provisions of sec 36(1) (Vii) of the I.T. Act, 1961 are set out for giving relief to the assessee and that they are not to be interpreted in such a way that they are opposite to each other. 7) The Ld. CIT(A) ought to have appreciated that the specific Rule 9 B of I.T. Rules, 1962 which is applicable to ....
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...., they will prevail over the general sections/provisions. In this connection, it is to submit that the Assessing Officer and the Ld. CIT(A) have relied on the provisions of Rule 9B of the Income Tax Rules, 1962 in support of their view with regard to the dis-allowability of the impugned loss. But the appellant herein, has claimed the impugned loss which represents advances paid for the impugned pictures in earlier years. It is submitted that, the assessee purchases the films from the production house by paying certain amount. The actual price is fixed at the time of release of the movie. The balance amount, if any, is either paid to the producers or recovered from them. In the appellant's case, an amount of Rs. 57,52,000/- was paid by the assessee in financial year 2009-10 to M/s. Vijay Bhaskara Productions and an amount of Rs. 6,00,000/- was outstanding as at 31.03.2012. The assessee also paid Rs. 12,77,000/- in financial year 2009-10 to M/s. Laxmi Narasimha Films and an amount of Rs. 2,19,000/- was outstanding as at 31.03.2012. Similarly Rs. 5,10,00,000/- and Rs. 1,07,00,000/- were paid to M/s.Viswamithra Creations and M/s. Silver Screen Movies respectively ....
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....f expenditure under Rule 98 of Income Tax Rules 1962 is not to be misinterpreted and used against the interests of the appellant. The loss of Rs. 19,16,082/- represents the refundable advance paid for purchase of picture which has become a bad debt allowable uls 36(l)(vii) of the Act. It is to submit that both the provisions of Rule 98 of the Income Tax Rules 1962 and the provisions of section 36(1)(vii) of the Act are set out for giving relief to the assessee and that they are not to be interpreted in such a way that they are opposite to each other. The specific Rule 98 of Income Tax Rules 1962 which is applicable to cases of Exhibition of Movies, is not to be used against the general provisions of section 36(1)(vii) of the Act. In such cases, the interpretation has to be construed in a manner beneficial to the assessee as held by the Apex Court in the case of CIT vs. Vegetable Products Limited [1973] 88 ITR 192 (SC). In view of the submissions it is prayed to allow the grounds of appeal and to delete the disallowance of Rs. 19,16,082/-. 4. The ad hoc disallowance of Rs. 5,30,747/- towards expenditure claimed under different heads is not warranted - [Gro....
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....espect of the four movies on account of which the assessee is claiming loss. The learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below and submitted that since Sections 36 & 37 of the I.T. Act are general provisions under which the assessee can claim set off of losses, it is to be accordingly allowed. He submitted that the provisions of Rules 9A and 9B are applicable to compute the cost of acquisition of a movie and not with regard to loss incurred by an assessee. Therefore, he submitted that the loss from its business should be allowed to the assessee. With regard to the disallowance of other expenditure on estimation basis, he submitted that the disallowance of 20% of expenditure by the AO is excessive and prayed for restricting the disallowance to 5% of the expenditure. 6. The learned DR was also heard, who relied on the provisions of Rule 9B of I.T.Rules and submitted that where specific provision is there, the same has to be applied as rightly done by the AO and the CIT(A). 7. Having regard to the rival contentions and Rule 9B of the I.T.Rules, we find that the assessee is not claiming the expenditure incurred on....
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.... the relevant previous year. In the facts of the present case, the four films, namely, 'Farishtey', 'Saugandh', 'Patthar ke Phool' and 'Patthar ke Insaan' had not completed a commercial run of 180 days during the preceding financial year, i.e., financial year 1990-91 relevant to the AY 1991-92. Therefore, the Assessee was entitled to a deduction to the extent that the cost of acquisition of the films did not exceed the amount realized by the Assessee from exhibiting the film on a commercial basis and/or sale of rights of exhibition in respect of some of the areas". Thus, Rule 9B does not preclude the assessee from claiming the loss on the distribution of feature films in the year in which such loss is incurred by the assessee. We have gone through the copies of the ledger a/c of advances received and written off which are now filed as additional evidence and find that the assessee has incurred loss on the distribution of each of the films which was been claimed by the assessee during the relevant A.Y. The learned Counsel for the assessee had also relied upon the following decisions in support of his contention that loss should be allowed to him in....