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2020 (11) TMI 217 - AT - Income TaxComputing the profits and gains of the business of production of feature films - amount received on sale of TV rights and audio rights of a feature film separately, instead of treating the same as part of “receipt on exhibition of film on commercial basis - assessee is engaged in the business of production of feature films - A.O. held that the receipt by way of sale of audio rights and TV rights does not fall under the category of “receipts from exhibition of films” prescribed under Rule 9A of IT Rules - AO did not allow set off of expenditure on production against the amount relating to sale of audio rights and TV rights - HELD THAT:- Due to technical advancement, it is now possible to sell audio rights separately apart from exhibition of feature films. Audio matter is part of feature film and is part of production of feature film. Nowadays, both audio & video form integral part of a feature film. In fact, a feature film without audio is rarest of rare feature. The cost of production of feature film includes expenditure on audio recording. Hence, we are of the view that the audio matter cannot be viewed separately distinct from the feature film, since it is intricately connected with the feature film. There should not be any dispute that, in the Indian film scenario, songs form integral part of the feature film and many a times, many films turned out to be successful due to songs. Public at large could visualise the film scenes on hearing the songs. Hence, it was made possible to assign the audio rights of films/songs separately. Hence, we are of the view that sale of audio rights should form part of amount realised on exhibition of films on commercial basis. Accordingly, we are of the view that the amount realised on sale of audio rights and TV rights would fall under the category of “exhibition of film on a commercial basis - See VIESHESH FILMS (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE 29, MUMBAI [2008 (8) TMI 600 - ITAT MUMBAI] We hold that the amount realised by the assessee on sale of audio rights and TV rights of the film would fall under the category of “exhibition of films on a commercial basis”. Accordingly, we direct the AO to allow deduction of expenditure incurred on production against the above said receipts also. The order passed by Ld CIT(A) is accordingly set aside. - Decided in favour of assessee.
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