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2020 (6) TMI 104 - AT - Income TaxLoss on pictures - deduction in respect of expenditure on acquisition of distribution rights of feature films - Assessee submitted that since Sections 36 & 37 of the I.T. Act are general provisions under which the assessee can claim set off of losses, it is to be accordingly allowed - whether the provisions of Rules 9A and 9B are applicable to compute the cost of acquisition of a movie and not with regard to loss incurred by an assessee? - HELD THAT:- Having regard to the rival contentions and Rule 9B of the I.T.Rules, we find that the assessee is not claiming the expenditure incurred on the acquisition of movies but the assessee is claiming loss due to non-recovery of advances paid. Rule 9B only provides a method of computing deduction available in respect of expenditure on acquisition of distribution rights of feature films, but does not address the sequence in which deductions are to be allowed. Rule 9B does not preclude the assessee from claiming the loss on the distribution of feature films in the year in which such loss is incurred by the assessee. We have gone through the copies of the ledger a/c of advances received and written off which are now filed as additional evidence and find that the assessee has incurred loss on the distribution of each of the films which was been claimed by the assessee during the relevant A.Y. Any debt which has become bad, can be written off as bad debt without having to establish that it has really become bad. In the case before us, the assessee has claimed to incurred Loss due to non-recovery of advances and therefore, claimed it as loss which is not impermissible under the law. However, the additional evidence filed by the assessee needs verification. Therefore, the issue is set aside to the file of AO for denovo consideration. The assessee’s grounds of appeal on this issue are accordingly treated as allowed for statistical purposes. Disallowance of expenditure debited to P&L A/c on the ground that it is not supported by pucca bills - AO has disallowed only 5% of the expenditure and not 20% as alleged by the assessee in its grounds of appeal. Except raising the above grounds, the assessee has not be able to establish as to why 5% disallowance is unreasonable. Therefore, the grounds against this disallowance are rejected.
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