1967 (12) TMI 8 - HC - Income Tax

Assessee is a partnership firm carrying on business in distribution and exhibition of films - expenses incurred in connection with the Silver Jubilee run - permissible for deduction under the provisions of s. 10(2)(xv)

Summary

Issues:
1. Deduction under section 10(2)(xv) of the Income-tax Act for expenditure incurred in connection with the Silver Jubilee celebration of a film exhibition.

The judgment delivered by the High Court of MADRAS involved the assessment of a deduction claim under section 10(2)(xv) of the Income-tax Act, 1922, for an expenditure related to the Silver Jubilee celebration of a film exhibition. The assessee, a partnership firm engaged in film distribution and exhibition, claimed a deduction of Rs. 13,376 for expenses incurred in connection with the celebration of the successful 25-week run of the film 'Kalyana Parisu'. The Income-tax Officer initially disallowed the claim, questioning the commercial expediency of the expenditure. However, the Appellate Assistant Commissioner supported the assessee's claim, emphasizing the normal nature of the expenditure and its positive impact on the market for the film. Subsequently, the Tribunal overturned the decision, leading to the reference under section 66(2) before the High Court.

The central question before the court was whether the disallowance of the claimed expenditure was permissible under section 10(2)(xv) of the Income-tax Act. The Tribunal had contended that the expenditure on the Silver Jubilee celebration lacked a direct link to securing further leases of the film or increasing collections, asserting that the 25-week run itself provided sufficient publicity. However, the court disagreed with this view, emphasizing that the expenditure fell within the ambit of section 10(2)(xv). The court noted that the expenditure was incurred in the course of the film exhibition business and was aimed at enhancing publicity to potentially boost collections during a period of declining revenue.

The court highlighted that the judgment on the expediency of the expenditure rested solely with the assessee, as repeatedly affirmed by previous court decisions. While the revenue authorities must ensure the factual nature of the expenditure and its alignment with business purposes under section 10(2)(xv), the reasonableness of the expenditure is not within their purview unless it pertains to the actual expenditure incurred. In this case, the court found that the expenditure was unquestionably connected to the film exhibition business and was laid out for business purposes, leaving no room for an alternative interpretation.

Consequently, the court ruled in favor of the assessee, allowing the deduction claim for the expenditure incurred in connection with the Silver Jubilee celebration of the film exhibition. The court also awarded costs to the assessee, including counsel's fee of Rs. 250, thereby resolving the issue in favor of the assessee.