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2015 (10) TMI 2253 - AT - Income TaxValidity of reopening of assessment - escapement of income has taken place as wrongly invoking provisions of section 32(1)(ii) instead of allowing calculation to be done with Rule 9B - Held that:- Coming to the merits of the case, without prejudice to the reopening, we find that the assessee offered income from the film "Dil Ne Jisa Apna Kaha" in the return of income filed and the Assessing Officer has reassessed the income with reference to that transactions by invoking section 32(1)(ii) of the Act. The assessment of income in the hands of film distributors has to be as per Special Provisions contained in Rule 9B of the Income Tax Rules, 1962. The dynamics of business income in the distribution of film are different and they are not categorized as 'intangible assets' within the meaning of section 32(1)(ii). The law has made separate provision for ascertaining the income from film distributor by providing for the same in Rule 9B. In this case, as stated M/s Sohail Khan Distribution has given rights of distribution to the assessee. In such situation, film was released on commercial basis and exhibited for more than 90 days before the end of previous year, the entire cost of acquisition of the film shall be allowed as a deduction while computing the profits and gains of such previous year. In this case M/s Sohail Khan sold the rights to the assessee in certain areas and undisputedly film has been released on commercial basis atleast for 90 days before the end of the previous, so the entire amount of acquisition shall be deducted in computing the profits and gains of such previous year. CIT(A) was not justified in making the disallowance of ₹ 1,35,75,000/- because calculation of loss in the release of film by a distributor for the purpose of distribution to be done, as per Rule 9-B of the Rule. The provisions of section 9B of the I.T. Rules are applicable to the assessee as the film was released on 10-9-2004 which is 90 days prior to 31st March, 2005 and the total cost incurred including cost of print and publicity is ₹ 2,39,30,039/-. After deducting the revenue realized, the net loss from the film of ₹ 84,021,740/- (Rs. 1,55,27,299/- (-) ₹ 2,39,30,039/-) was rightly debited in the P&L Account. - Decided in favour of assessee.
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