TMI Blog2008 (8) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... imed expenses on total cost of production of film for various expenses which were not signed, hence, disallowed a sum - onus for allowability of any expenditure - HELD THAT:- It is noted that these expenses have been incurred through self-made vouchers, which are not acknowledged by the recipients, hence, having regard to the possibility of inflation of expenses, in this manner and also for want of verification, we confirm the Order of the ld. CIT(A). Thus, this ground of the assessee stands dismissed. Disallowance of loss - Film produced exclusively for TV telecast - Assessee claimed that mode and technology of producing films for TV is different from film produced for theatrical exhibition - claimed that if sub-rule 9A(6) was applied then the assessee was entitled for full amortization of cost of this film - HELD THAT:- We find that the assessee has taken a Certificate from Central Board of Film Certification, which is valid for theatrical release only. Hence, how a film produced for theatrical release, having a different material/technology, can be claimed to have been produced exclusively for TV telecast and if it is not so, then, why the Certificate from the Censor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. 3. In Ground No. 1, the assessee is aggrieved by the decision of the ld. CIT(A) in confirming the disallowance made by the Assessing Officer out of Motor Car Expenses comprising of car maintenance, insurance, interest on car loan and depreciation thereon. 4. The facts, in brief, are that the Assessing Officer disallowed 1/6th of Motor Car Expenses on account of personal use by the Directors. On appeal, the ld. CIT(A) also confirmed the same. Aggrieved by this, the assessee is in appeal before us. 5. The learned Counsel contended that the assessee-company was engaged in film production and it was having six cars which were utilized by the Directors and employees of the assessee company for business purposes, hence, no disallowance was warranted. The learned Counsel, thereafter, contended that in a case of a Company, being of an independent legal entity, no disallowance could be made for personal use. In this regard, he placed reliance on the decision of the Tribunal in the case of Dy. CIT v. Haryana Oxygen Ltd. [2001] 76 ITD 32 (Delhi) and also on the decision of the Hon ble Gujarat High Court in the case of Sayaji Iron Engg. Co. v. CIT [2002] 253 ITR 749 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by both the parties, material on record and orders of the authorities below. It is noted that these expenses have been incurred through self-made vouchers, which are not acknowledged by the recipients, hence, having regard to the possibility of inflation of expenses, in this manner and also for want of verification, we confirm the Order of the ld. CIT(A). Thus, this ground of the assessee stands dismissed. 13. In Ground No. 4, the assessee is aggrieved by the decision of the ld. CIT(A) in confirming the disallowance of loss of Rs. 99,91,212 claimed by the assessee in respect of film "Ashique". 14. The facts, in brief, are that during the year under consideration the assessee company claimed to have released two films, produced by the assessee company viz., Ghulam and Ashique. In respect of film "Ashique" the assessee had shown a loss of Rs. 99,91,212 which was incurred due to realisation being less than the cost of production. The Assessing Officer noted that the cost of production of this film was Rs. 2,24,91,212 whereas the realisation was at Rs. 1,25,00,000, hence, the Assessing Officer required the assessee to submit evidences relating to release of the film durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released on TV, its commercial value was exchanged, hence, the loss, if any, suffered was allowable in the year in which telecast rights of the film were sold. The assessee also submitted a Certificate of Censor Board, which was sent by the ld. CIT(A) to the Assessing Officer for verification and in his report, the Assessing Officer acknowledged the same without giving any comment thereon. The assessee also submitted a Paper book which was also forwarded by the ld. CIT(A) for comments of the Assessing Officer who submitted that as far as the question whether the film was a feature film or a TV serial was concerned, the same could be ascertained in the format of the Memo in which the film was shot and also the material and technique used in the production of the film. It was also reported that whether the assessee wanted to release the same on TV or in theatre, it was discretion of the assessee, however, that fact by-itself could not result into non-compliance of Rule 9A of the Income-tax Rules, 1962. The ld. CIT(A) also noted that the loss, disallowed by the Assessing Officer for the year under consideration, had been allowed by the Assessing Officer in the next assessment year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of sub-rule (6) of Rule 9A of Rules for the reason that the assessee could not demonstrate the fact that conditions for invoking said sub-rule existed. Accordingly, he confirmed the action of the Assessing Officer. The assessee, being aggrieved, is in appeal before us. 15. The learned Counsel narrated the facts and also submitted that the assessee company was engaged in the production of feature films, TV Films and TV Serials. In addition to these films, the assessee company also produced two other films for TV which were not released in theatres and the very fact that the assessee signed self theatrical right was never to prove that the film was the TV Film and in such cases, the assessee company claimed expenses in the year of sale of telecast rights, hence, the said loss was allowable to the assessee as per the Method of Accounting. The learned Counsel also placed reliance on the Written Submissions filed before the ld. CIT(A). 16. The ld. Departmental Representative, on the other hand, contended that the ld. CIT(A) had examined the issue in detail and took into consideration all aspects of the matter while rejecting the claim of the assessee, hence, the same was li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record to show the source of balance Rs. 65 lakhs which may have been realized either from any other distributors or TV Telecast companies and in both the situations, the assessee s claim that it was produced exclusively for exhibition on television stands contradicted. 18. Having stated so, now we deem it fit to consider the claim of the assessee regarding application of Rule 9A of the Income-tax Rules, 1962. The Assessing Officer has held Rule 9A, was applicable because of the fact that Form 52A had been filed by the assessee and at no point of time the assessee claimed or furnished information regarding the fact that this film was being produced only for TV. The Assessing Officer has also held that if it was released on TV, it was one of the modes of exhibition and for the reason also that Rule 9A was applicable. We find that Rule 9A has been specifically provided by the Legislature to compute the Profits and Gains of Business of production of feature films. As per Rule 9A(2), the film producer is entitled for deduction of cost of production of the film on selling of rights of exhibition of the film in the year in which the film is certified for release by the Censor Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough not specifically provided, ultimately it is a mode of exhibition and the assessee has given rights for such exhibition on commercial basis, hence, in our opinion, provisions of Rule 9A(6)( a ) are not applicable. For a moment, if it is assumed that such assignment of exhibition rights on television is not covered in the specific mode of exhibition of the feature film, the assessee has not brought any material on record to show that the application of Rule 9A was not practicable in the present situation. We also find that the Assessing Officer, having regard to the fact that the film was released for exhibition for less than 90 days, has reduced the cost of production by the amount realized by the assessee and has carried forward the balance to the next year and wherein it has been allowed as deduction, hence, in our opinion, such action of the Assessing Officer is perfectly justified. In this regard, we consider it pertinent to mention here that the assessee claimed to have produced two other films for the TV which were not released in theatres. The assessee, however, has not brought any material on record to show that it claimed the cost of production of the said films in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ghulam could be allowed as the assessee satisfied all the conditions, mentioned under section 80-IA, of the Act and particularly focused on the fact that the production of Cinematograph Film amounted to manufacture or processing of goods. Since this issue was not considered by the Assessing Officer in the assessment proceedings, the ld. CIT(A) called report from the Assessing Officer in regard to the assessee s claim under section 80-IA. The Assessing Officer submitted that the assessee did not satisfy the conditions of section 80-IA, hence, the assessee was not eligible for deduction hereunder. The ld. CIT(A) examined the claim of the assessee and rejected the claim of the assessee. Concluding findings of the ld. CIT(A) are as under : "8.11 From the totality of discussion above, it is held that an industrial undertaking eligible for deduction under section 80-IA of the Act has necessarily to be formed by the way of investment of capital in plant and machinery not previously used for any purpose. Since the appellant has neither any specific location for the production of cinematographic films nor does it have any plant and machinery (except some lighting equipment) and the produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ique , to be allowed as deduction which the ld. CIT(A) rejected for the reason that the assessee s claim in respect of cost of production of this film was only partially allowed in the year under consideration, hence, additional sum could be considered for allowance only in next assessment year. However, the ld. CIT(A) did not give any specific direction to the Assessing Officer in this regard. Aggrieved by this, the assessee is in appeal before us. 27. The learned Counsel contended that if Ground No. 4 of this appeal was accepted then these expenses were also to be considered as allowable or otherwise suitable direction could be given to the Assessing Officer to allow the same in the next assessment year if the assessee s claim, in this respect, was not accepted. 28. The ld. Departmental Representative, on the other hand, strongly relied on the Order of the ld. CIT(A). 29. We have considered the submissions made by both the parties, material on record and orders of the authorities below. In view of our discussions on Ground No. 4, direct the Assessing Officer to allow these expenses as a part of the cost of production in the next year after due consideration. Thus, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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