TMI Blog2008 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... T REPORTABLE BHAN, J. 1. With the leave of the Court the Revenue has filed the present appeal, against the judgment and order dated 27 th November, 2001 of the High Court of Kerala in ITA No. 105/1999, rejecting the appeal filed by the appellant under Section 260 of the Income Tax Act, 1961 (for short "the Act"). 2. The respondent-assessee (for short "the assessee") is a film producer. In his income tax return for the assessment year 1992-93, the assessee claimed the benefit of carry forward of Rs.39,43,830/- as amortization expenses. The Assessing Officer allowed the claim of amortization. On appeal, the Commissioner of Income Tax, in exercise of his jurisdiction under Section 263 of the Act, set aside the assessment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not correct, CIT (Appeals) gave directions to the Assessing Officer to obtain separate accounts in respect of the different films produced by the assessee and determine the claim of the amortization in accordance with rule 9A of the Rules. It was clarified that in case there was loss in respect of the old film on such computation, that would have to be subject to the provisions of Sections 139(3) and 80 of the Act. In other words, it was held that in respect of old films if there was loss, the same would be eligible for carrying forward only if the return of income was filed within the statutory period. In regard to the second film, it was held that the amortization allowance for the next year was not subject to the provisions of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the next assessment year. 6. Section 80 finds its place in Chapter VI dealing with Aggregation of Income and Set off by carry forward of loss which, prevalent during at the relevant assessment year, read as under: "Section 80 SUBMISSION OF RETURN FOR LOSSES. Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A." 7. Section 80 at the relevant time provided that no loss which has not been determined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Board of Film Censors: Provided that the cost of production of a feature film, shall be reduced by the subsidy received by the film producer under any scheme framed by the Government, where such amount of subsidy has not been included in computing the total income of the assessee for any assessment year. (2) Where a feature film is certified for release by the Board of Film Censors in any previous year and in such previous year,-- (a) the film producer sells all rights of exhibition of the film, the entire cost of production of the film shall be allowed as a deduction in computing the profits and gains of such previous year; or (b) the film producer (i) himself exhibits the film on a commercial basis in all or some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the rights of exhibition, shall be allowed as a deduction in computing the profits and gains of such previous year; and the balance, if any, shall be carried forward to the next following previous year and allowed as a deduction in that year. (4) .." 10. Counsel for the parties have been heard. 11. It is not disputed before us that a film is a capital asset in the hands of a film producer and the subsidy given by the State Government to a film producer is a capital receipt. Section 80 falls under Chapter VI, which deals with aggregation of income and set off or carry forward of loss. 12. Rule 9A provides for deduction of expenditure incurred on production of feature films. Rule 9A would appropriately be applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited and then allow the deduction for cost of production of the film to the extent of the collections made during the period of exhibition only. The balance cost of production will be amortized under Rule 9A(2) and then that will be allowed as deduction for the next year. It is not a business loss. That if a film is not released for exhibition on a commercial basis at least 180 days before the end of such previous year, the cost of production of the film insofar as it does not exceed the amount realized by the film producer by exhibiting the film on a commercial basis, is to be allowed as a deduction in computing the profits and gains of such previous year and the balance, if any, is to be carried forward to the next following previou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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