Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Smt. Achla Sabharwal Versus Asst. CIT, Circle 29 (1) , New Delhi

2016 (2) TMI 164 - ITAT DELHI

Accrual of income - AO was of the view that the income arising out of the contract should be taxed as income during the current A.Y - Held that:- A.O. was in error in his conclusions that, whenever Rule 9B is applied for claims of expenditure, the income should also be accounted for and offered to tax in the year of receipt. Rule 9B of the Income Tax Rules, 1962 is a special rule which provides for claims of deduction in respect of expenditure, in respect of distribution of films. The Income Tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt in all these A.Ys equally. The addition in this year amounts to double taxation. Distribution rights in the film is a property. This property has been licensed for a time period of seven years by the assessee to the third parties. The consideration received is for exploitation of certain rights in these films for a period of seven years. Thus we are of the considered opinion that the income arising out of such licensing of the right to exploit the film for seven years is to be taxed on time b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Adv. For The Department : Sh. K.K.Jaiswal, D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER These are Appeals directed against separate orders of the Ld.Commissioner of Income Tax (Appeals)-XXV, New Delhi dated 31.12.2010 and 04.01.2013, pertaining to the Assessment Year (A.Y.) 2007-08. ITA 1541/Del/2011 is an appeal by the assessee against the order of the Ld.CIT(A) upholding the addition to income made by the Assessing Officer (AO). ITA no.1807/Del/2013 is an appeal by the Revenue against t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tain films by the assessee by way of an agreement for the period of seven years. The assessee, on the ground that, the agreement is for the period of seven years, claimed that the income is to be spread over the period of seven years. She accounted for one seventh of the total sale value i.e. ₹ 9,21,428/- as income of the year under consideration. The balance amount of ₹ 55,28,572/- was declared as income for the six subsequent A.Ys at the rate of ₹ 9,21,428/- per year and asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts are sold, as it is, to other concerns and sometimes the assessee exhibits films herself. In many cases the feature films were exhibited through National Film Development Corporation, Dordarshan etc. The assessee is a sub-distributor of the old feature films and further re-exhibition of such films is always uncertain as against the new film. Therefore, the future economic benefit out of these rights is not certain. (ii) The rights so purchased should not be treated as intangible assets as in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ile preparing the Profit & Loss A/c regarding the claim of deduction on account of expenditure incurred by the assessee in purchasing these film rights. In the case of film distributor or Subdistributor, the deduction of expenditure incurred on purchase of exhibition/distribution rights is governed by a Special Rule i.e. Rule 9B of Income Tax Rule 1962. Though, in the accounts the deduction was shown as depreciation but in actual the deduction is being claimed according to Rule 9B only. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

duction of ₹ 23,72,000/- has been claimed in this year. This shows the bona-fide of the assessee. (iv) The assessee is not engaged in any use, consumption of acquired cinematographic right other than its assignment for agreed consideration for given period to other parties i.e. right are not been used to produce any audio, video products. Therefore, the purchase/sale of cinematographic rights in the assessee case should not be treated as intangible assets and the deduction as per Rule 9B s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lms assigned to M/s Prime Focus Limited is beyond 31.03.2007 therefore, no part of sale proceeds should relate to the current year. However against this, the assessee has recognized an amount of ₹ 6,21,428.57 (1/7th of total consideration of ₹ 43,50,000/-) as income of the AY 2007-2008. Similar explanation has been given for the films assigned to M/s Indus Video Pvt. Ltd. The assessee has also explained that she has recognised the income pro-rata. 2.3. The AO did not accept the conte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mercantile system of accounting and as the agreements assigning the rights to M/s Indus Video P.Ltd. and M/s Prime Focus Ltd. were entered during the current A.Y., the income has accrued during the year. He further held that if the assessee acquires a right to receive the income, the income can be said to have accrued to him at the time when such right to receive the income was acquired. He stated that the assessee cannot follow two different systems of accounting while recognising the expenditu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Ld.D.R. on behalf of the Revenue. 6. On a careful consideration of the facts and circumstances of the case, perusal of papers on record and orders of the authorities below, as well as case laws cited, we hold as follows. 7. In our considered opinion the A.O. was in error in his conclusions that, whenever Rule 9B is applied for claims of expenditure, the income should also be accounted for and offered to tax in the year of receipt. Rule 9B of the Income Tax Rules, 1962 is a special rule which p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r all these A.Ys. The income in question has been offered to tax and has been taxed by the department in all these A.Ys equally. The addition in this year amounts to double taxation. Distribution rights in the film is a property. This property has been licensed for a time period of seven years by the assessee to the third parties. The consideration received is for exploitation of certain rights in these films for a period of seven years. Thus we are of the considered opinion that the income aris .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

conclusion does not appear to be justified looking to the nature of the liability It is true that the liability has been incurred in the accounting year But the liability is a continuing liability which stretches over a period of 12 years It is, therefore, a liability spread over a period of 12 years Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred It cannot be spread over a n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version