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2016 (2) TMI 164 - AT - Income TaxAccrual of income - AO was of the view that the income arising out of the contract should be taxed as income during the current A.Y - Held that:- A.O. was in error in his conclusions that, whenever Rule 9B is applied for claims of expenditure, the income should also be accounted for and offered to tax in the year of receipt. Rule 9B of the Income Tax Rules, 1962 is a special rule which provides for claims of deduction in respect of expenditure, in respect of distribution of films. The Income Tax Act or Rules have not provided for any special manner in which income in such cases have to be taxed. Thus the general law prevails. Coming to the accrual of income, we find that the assessee has offered this income for the next subsequent six A.Ys i.e. A. Y. 2008–09 to 2012–13 at the rate of ₹ 9,21,428/- at prorate basis. The assessee has included in the paper book assessments for all these A.Ys. The income in question has been offered to tax and has been taxed by the department in all these A.Ys equally. The addition in this year amounts to double taxation. Distribution rights in the film is a property. This property has been licensed for a time period of seven years by the assessee to the third parties. The consideration received is for exploitation of certain rights in these films for a period of seven years. Thus we are of the considered opinion that the income arising out of such licensing of the right to exploit the film for seven years is to be taxed on time basis. We agree with the submissions made by the Ld.Counsel for the assessee that the income in question has to be taxed over the period of the contract. Hence the addition made is deleted and the appeal of the assessee is allowed. Also the penalty levied u/s 271(1)(c ) on such addition cannot be sustained.
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