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TMI Blog2015 (10) TMI 2253X X X X Extracts X X X X X X X X Extracts X X X X ..... wing depreciation on film distribution rights acquired instead of following the provisions of Rule 9B of Income Tax Rules, 1962. All the grounds of appeal are without prejudice to one another. The appellant respectfully submits that the income was correctly assessed u/s. 143(3) and the reassessment proceedings commenced was bad in law and that too based on Audit Objections. In law, therefore the Learned CIT(A) ought to have held the reopening bad in law. Without prejudice, the appellant respectfully further submits that the additions made is required to be deleted because that has happened due to incorrect application of provision of income Tax Act, 1961 read with Rule 9B of Income Tax Rules, 1962." 3. Facts of the case are that the assessee is engaged in the business of exhibition and distribution of films. The assessee filed its return of income for the year on 31-10-2005 declaring net loss of Rs. 37,61,626/-. Assessment was initially completed u/s 143(3) of the Income Tax Act, 1961 on 21-03-2012 determining total income at Rs. 'nil'. Subsequently, the case was reopened by issue of notice u/s 148 of the Act as the Assessing Officer has reason to believe that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be denied the benefit of depreciation as allowed u/s 32 of the Act. Accordingly, ground No. 2 titled (b) is dismissed." 4. Before us, the ld. Authorised Representative of the assessee submitted that the assessee is in the business of distribution of films in Bombay Circuit which encompasses areas of Maharashtra, Gujarat, Goa and partly Karnataka. During the year under consideration, the assessee acquired distribution rights of Bombay Circuit of the film "Dil Ne Jise Apna Kaha" for a period of five years from M/s Sohail Khan Production for a consideration of Rs. 1.81 crores. He submitted that under the facts and circumstances, the CIT(A) was not justified in upholding the reassessment. The CIT(A) erred in law in holding 'valid' reassessment proceedings arising due to incorrect interpretation of law. The CIT(A) also erred in law in confirming the additions made by AO in the order passed u/s 143(3) rws 147 of Income Tax Act, 1961. The CIT(A) ought to follow the provisions of Income Tax Act, 1961 read with Income Tax Rules, 1962 and compute the income correctly instead of computing income in a unlawful manner by incorrectly allowing depreciation on film distribution rights ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted and after verifying all the details, the Assessing Officer passed an order u/s 143(3) of the Act on 28.11.2007 accepting the loss incurred. Accordingly, the returned loss of Rs. 37,61,626/- was accepted in the assessment order. Since the assessee was in the business of distribution of films, the case records were transferred to ACIT - 16(2) and audit was conducted by the audit party of the department and came to the conclusion that such rights acquired of the film are to be classified as 'intangible rights' which is subjected to depreciation as per section 32(10(ii) of the I.T. Act. The provisions of section 32(1)(ii) r.w. Rule 5 of the Income tax Rules which reads as under :- "Intangible assets such as knowhow, pattern, to copy right, trademarks, licences, franchises or any business or commercial rights of similar nature acquired on or after 1st April, 1998 are eligible for depreciation at 25 per annum." Based on the audit objections, the Assessing Officer issued notice u/s 148 were duly served on the assessee. In the reasons recorded, the Assessing Officer emphasized on 'intangible assets' acquired in the form of distribution rights of the film. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after in this rule referred to as film distributor), the deduction in respect of the cost of acquisition of a feature film shall be allowed in accordance with sub-rule (2) to sub-rule (4)." 7. The deduction in respect of the cost of acquisition of a feature film shall be allowed in accordance with sub rule (2) to sub-rule (4). For the purpose of cost of acquisition in relation to a feature film means the amount paid by the film distributor to the film producer under an agreement entered into by the film distributor or such other distributor, as the case may be for acquiring the rights of exhibition and where the rights of exhibition have been acquired on a minimum guarantee basis, the minimum amount guaranteed not being - the amount of expenditure incurred by the film distributor for the preparation of the positive prints of the film and the expenditure incurred by him in connection with the advertisement of the film. Where a feature film is acquired by the film distributor in any previous year and in such previous year the film distributor sells all rights of exhibition of the film, the entire cost of acquisition of the film shall be allowed as a deduction in computing the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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