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TMI Blog2013 (12) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the decision by the hon'ble court in the case of CIT vs. Mukta Arts Pvt. Ltd. (in ITA No.584/2001 dated 25/08/2008). Copy of the said order was also placed by him on record. Further, per its Cross Objection (CO), the assessee seeks deduction u/s.80IB on the enhanced income, i.e., were the assessee's claim for the impugned loss on abandonment on a film project is not accepted. The same is an alternate claim and shall not survive if the Revenue's appeal were to be dismissed, i.e., shall become infructuous. The Ld. DR, on being confronted with the same by the Bench, conceded to the issue arising being the same as that before the hon'ble High Court. Findings 3. We have heard the parties, and perused the material on record. 3.1 The only issue arising in the instant appeal is the maintainability in law of the disallowance of the expenditure in the sum of Rs.88,31,000/- in relation to an abandoned film by the assessee, a company in the business of producing feature films and television programmes. The Assessing Officer (AO) disallowed the same on the ground of a feature film being a capital asset in the hands of the producer, so that the loss arising on it being abandoned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government to the producers of feature films in the State is only toward inducement for the production of a capital asset and, therefore, not a revenue receipt, for it to be taxable (page 781). In fact, the hon'ble court sought justification and expressed surprise at the Revenue pressing the matter despite the acceptance by it, vide Circular No. 541 dated 25.07.1989 (reported at [1989] 179 ITR (St.30)) by CBDT, of the said decision by the hon'ble High Court of Andhra Pradesh (pages 779, 781). The findings by the hon'ble court are summed at pages 779 & 780 of the report in three parts, being (a), (b) & (c), with the part (b) reading as under: (page 780) "(b) the said subsidy was granted by the Government to assist the assessee to acquire a capital asset. Film is a capital asset in the hands of the producers. It has been in terms held in paragraph 11 of the Tribunal's judgment as under: The financial assistance was received by the assessee for the production of Marathi pictures. ..." We are, in view of the foregoing, completely unable to agree with the basis of or the distinguishing of the decision by the hon'ble jurisdictional High Court in case of Sadicha Chitra (supra) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r capital expenditure, is a matter of fact and not of law. The principles guiding the same are well settled. Succinctly put, where an expenditure gives rise to a benefit or advantage of an enduring nature, the same can be said to be in the capital field. At this stage, we may advert to rule 9A of the Income Tax Rules, 1962 (the 'Rules' hereinafter), which prescribe the manner of computation of the profits and gains of the business of production of features films. It allows deduction of the cost of the production (which is negatively defined to include all the expenditure incurred on the production of the film other than expenditure towards preparing positive prints and that incurred on the advertisement of the film after its certification by the Board of Film Censors), where the film is exhibited by the producer or sold by him, i.e., as the case may be, or partly by one and partly by the other, in case the film is released for exhibition during the relevant previous year for a period of 90 days or more (r. 9A(2)). If, however, the said period is below 90 days, the deduction qua the cost of production is to be allowed only to the extent of the sums realized on sale or exhibition, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, is, accordingly deductible as a business expenditure on its abandonment. The only condition to which this would be subject and, without doubt, is that the abandonment is not temporary, i.e., for the time being, as where a project is shelved for the time being on account of some anticipated delays in its completion; some financial problems, etc. The general principles of commercial accounting, as we have found, being squarely applicable, such temporary suspension of work shall not result in the expenditure becoming infructuous or the work on the film project, i.e., to the extent undertaken, loosing its value to the business. Reference in this context may be made to the decision in the case of Lord's Dairy Farm Ltd. vs. CIT [1955] 27 ITR 700 (Bom.), wherein the hon'ble court has discussed the legal position with reference to a claim in respect of a business loss on theft or embezzlement. It stands clarified that so long as there is a possibility of the money being recovered from the employee having embezzled the money, there is no loss to the assessee (refer page 708). 3.4 Having discussed the general propositions in relation to the issue under reference, we may now advert to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the hon'ble court being based on concession, without examining the issue on merits and de hors the considered decision by the said court in the case of Sadicha Chitra (supra) could not, therefore, be regarded as establishing a binding precedent. Per the same (i.e., Sadicha Chitra (supra)), the hon'ble court has clearly held a feature film to be a capital asset. True, a film could retain commercial value or viewership appeal over time, inasmuch as only viewership would provide value or yield revenue for its producer, even years after its first release, i.e., years after its production, so that it continues to be an asset of the business. Films generally appeal across generations and, consequently, have an enduring value. Why, master pieces or classics have been known to transcend not only time barriers but also of language and geography. As the adage goes; a thing of beauty is a joy forever. It is perhaps this that prevailed with the hon'ble court in holding a feature film to be a capital asset. However, each film is a unique product and its viewership potential - which is itself a subjective matter, incapable of an objective assessment - would vary on account of a number of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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