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2014 (9) TMI 940 - AT - Income TaxSet-off of losses - Disallowance of expenditure related to production of films - Not covered under cost of production as defined under the provisions of rule 9A of the Income-tax Rules, 1962 - Held that:- It was agreed by CIT (A) that as per rule 9A, assessee had correctly carried forward loss of ₹ 2,09,98,862 to the next previous year, i.e., financial year 2008-09 (assessment year 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 ₹ 87,46,787 of P-6 against the profit of film 'Chandamama' (P-5) of ₹ 51,00,888. Hence, CIT(A) does not dispute the fact that the assessee is eligible to set-off of loss. Disallowance of expenditure related to production of films - The Commissioner of Income-tax (Appeals) 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 the assessee's claim under section 37(1) of the Act. In this context, it is to be noted that the hon'ble Madras High Court in the case of Prasad Productions P. Ltd. [1989 (1) TMI 38 - MADRAS High Court] has held that even if expenditure relating to positive prints, etc., is not allowable under rule 9A, but, the same can be allowed under section 37(1) of the Act, as it is incurred in connection with the business. It is not disputed either by the Assessing Officer or by the Commissioner of Income-tax (Appeals) that the assessee has incurred the expenditure in connection with the business of production of film. Therefore, applying the ratio laid down by the hon'ble Madras High Court as well as the decisions of the Tribunal, we allow the assessee's claim that the expenditure incurred is to be allowed under section 37 of the Act, even though it may not be allowable under rule 9A. Further, the assessee is also eligible to set off the expenditure incurred against profit of P-5 under section 70(1) of the Act. Accordingly, we allow the grounds raised by the assessee and direct the Assessing Officer to delete the additions made. - Decided in favour of assessee.
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