TMI Blog2012 (4) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on the production of the film is allowable as deduction as per the provisions of Rule 9A, then no deduction is permissible de-hors the provisions of Rule 9A. Allowance of cost of the feature film as business loss - abandoned project - held that:- the assessee's case is not for the claim of abandoned project or covered under Rule 9(4). Therefore, the case relied upon by the assessee are not applicable in the facts of the present case. Further, the alternative plea of the assessee is pertaining to the issue of allowing the business loss in the assessment year other than the year under consideration, which cannot be adjudicated in the proceedings of this year. Business loss as per Rule 9A(4) - held that:- The deduction shall be allowed in accordance with the provisions of sub rule (2) to sub rule (4) of Rule 9A of I T Rules 1962. Therefore, sub rule (2) to (4) expresses various circumstances and procedures to allow the deduction. Whereas sub rule (5) of Rule 9A stipulates the conditions which are required to be fulfilled for such deduction is allowed. - when the assessee has neither himself exhibits feature film on commercial basis nor sold the rights of exhibits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ₹ 25,25,000/-, hence necessary direction may be give to increase the opening stock of the A.Y. 2007-08. Ground nos 1 2.1. 3. The assessee is an individual and in the business of production of TV Serials/film. During the course of assessment proceedings, the Assessing Officer noted from the P L account that the assessee has valued the closing stock at ₹ 25,25,000/- against the opening stock of ₹ 46,00,425/-. The assessee has thus booked a paper loss of ₹ 20,75,445/-. The Assessing Officer asked the assessee to explain such valuation and consequent loss. In response, the assessee filed its reply vide letter dated 7.10.2009. The main submission of the assessee before the Assessing Officer was that the assessee has produced an art film 'Chusuar' in the financial year 2003-04 and carried forward the same as closing stock of ₹ 46,00,425/-. The assessee made a low budget film with unknown artists in order to keep the cost of production low. However, unfortunately the cost of production actually went double the budget intended or expected by the assessee. Because of unknown artists, high cost of production and current trends of corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown at ₹ 25,25,000/-, which was based on commercial decision taken on the basis of trade enquiries with Boobna Entertainment Pvt Ltd which is in this line of business. He has relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44/54 Taxman 499 and submitted that the Hon'ble Supreme Court has held that the assessee is entitled to value the closing stock either at cost or market price whichever is less. He has referred the letter dated 20th March 2007 placed at page 75 of the paper book written by M/s Boobha Entertainment Pvt Ltd and submitted that the assessee has valued the closing stock on the basis of the value as offered by M/s Boobha Entertainment Pvt Ltd. 5.1 On the other hand, the ld DR has submitted that the assessee has produced nothing before the Assessing Officer despite specific enquiries made by the Assessing Officer. He has further submitted that no reason has been explained for non production of evidence before the Assessing Officer. Therefore, alleged additional evidence is an afterthought and self serving document procured by the assessee. He has relied upon the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the evidence, therefore the assessee did not file the same before the Assessing Officer. It is pertinent to note that the Assessing Officer has raised a specific query whereby the assessee was asked to explain such valuation and subsequent loss. The assessee filed its reply vide letter dated 7.10.2009. Therefore, the assessee was given sufficient opportunities to explain and substantiate its claim of revaluation of closing stock. Further, the assessee is seeking the additional evidence being letter dated 20.3.2007 whereas the reply to the query of the Assessing Officer was filed on 7.10.2009. When the assessee has not explained any cause which has prevented from producing the said evidence before the Assessing Officer, then the production of the intended additional evidence, in our view is an afterthought because had the said evidence was in existence when the Assessing Officer raised the query and the assessee filed the reply dt 7.10.2009, in all probabilities, the assessee would have filed the same. Even otherwise when the case of the assessee does not fall in any of the exception provided under sub-rule (1) of Rule 46A, then the assessee cannot claim the same as a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that rule 46A or its sub clauses is ultra vires section 250 or 251 of the Act. The rule does not affect the power of the Appellate Assistant Commissioner conferred upon him by that rule. It in addition gives a right to the appellant in the matter of production of additional evidence. 7. As regards the value of the closing stock, the assessee has claimed valuation on the basis of market value of the film and relied upon the letter dated 20.3.1007. The deduction in respect of cost of production of feature film is allowed as per Rule 9A of the I T Rules; therefore, if the assessee is not entitled for deduction of the cost of the production under Rule 9A, then the assessee is not permitted to book the artificial loss by reducing the value of the closing stock on the ground that the market value of the feature film is less than the cost of production. The value of the stock no doubt can be at cost or realisation value whichever less; but that only in the case is where the entire cost of the stock has already been debited to the P L account and allowable under the provisions of the Act. Where the cost of production of the film cannot be allowed as deduction until and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of allowing the business loss for any other year is not a subject matter for the present proceedings. Therefore, no such direction can be given in the proceedings for the asst year under consideration. He has relied upon the orders of the lower authorities. 10. We have considered the rival contention as well as the relevant material on record. At the threshold, we make it clear that the assessee's case is not for the claim of abandoned project or covered under Rule 9(4). Therefore, the case relied upon by the assessee are not applicable in the facts of the present case. Further, the alternative plea of the assessee is pertaining to the issue of allowing the business loss in the assessment year other than the year under consideration, which cannot be adjudicated in the proceedings of this year. Hence, no direction is required to be passed for considering the claim for any other year when it is not allowable for the year under consideration. Accordingly, this ground of the assessee is rejected. 11. Ground no. 2.3 is regarding allowing business loss as per Rule 9A(4). 11.1 The ld AR of the assessee has submitted that as per Rule 9A(4) where duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e film on a minimum guarantee basis, the minimum amount guaranteed and the amount, if any, received or due in excess of the guaranteed amount or where the film producer follows cash system of accounting, the amount received towards the minimum guarantee and the amount, if any, received in excess of the guaranteed amount, are credited in the books of account maintained by him in respect of the year in which the deduction is admissible. 12.1 sub rule (5) begins with non obstinate clause which means sub rule (5) has overriding effect and the other sub rules under rule 9A are subjected to sub rule (5). It is manifest from sub rule (5), no deduction can be allowed under Rule 9A unless the conditions as stipulated under sub rule (5) are satisfied. Therefore, when the assessee has neither himself exhibits feature film on commercial basis nor sold the rights of exhibits of the feature film nor transfer the rights of exhibits of feature film, then the claim of deduction is hit by sub rule (5) of Rule 9A of the I T Rules and cannot be allowed. 13. Ground no. 2.4 is regarding alternative plea of opening stock of next year should be taken as value of closing stock adopted b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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