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M/s. N. Chandra Global Infotainment Ltd Versus ITO 11 (1) (3) , Mumbai

2016 (7) TMI 390 - ITAT MUMBAI

Disallowance of loss - quantum of loss - assessee is engaged in the business of production of films - Held that:- We are of the view that the reasoning given by the tax authorities to restrict the loss to ₹ 19.00 lakhs cannot be considered to be correct one. Since the assessee has taken a commercial decision in the normal course of carrying on its business and since the assessing officer has not brought on record any material to show that identical transaction with identical set of facts c .....

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direct the AO to delete the impugned disallowance of ₹ 45.83 lakhs. - Decided in favour of assessee. - I.T.A. No. 6693/Mum/2012 - Dated:- 7-6-2016 - Shri B.R. Baskaran (AM) & Ramlal Negi (JM) For The Assessee : Dr. P Daniel For The Department : Shri Sacchidanand Dube ORDER Per B.R. Baskaran, AM :- The appeal filed by the assessee is directed against the order dated 07- 08-2012 passed by Ld CIT(A)-3, Mumbai and it relates to the assessment year 2009-10. The assessee is aggrieved by the .....

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its rights over the film cited above. It was agreed that the production of film shall be commenced by October, 2006 and the same shall be completed by October, 2007. The agreement provided that the above said film shall be directed by Shri N. Chandra and the IPR attached with the film shall be retained by the assessee. It was further agreed that the fixed price to be paid for assignment of work & rights shall be fixed at ₹ 2.25 crores and in no event it shall exceed ₹ 2.50 crores .....

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resembled the name of the film that is going to be produced by the assessee. Hence the assessee was constrained to change the name of film to Yeh Mera India and the assessee got revised certificate on 20-12-2007. Due to these problems, the production of film could not be fully completed by the assessee. Hence the assessee was burdened with the liabilities that arose under the agreement entered with AFL. 4. By that point of time, the assessee had incurred a sum of ₹ 2.49 crores towards pro .....

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ng the year ending 31.3.2009. Subsequently M/s RBEL transferred its rights over the film to another company named M/s Pen India Ltd on 07-07-2009 for a consideration of ₹ 2.30 crores. The AO, by taking into the above said transaction, took the view that the consideration for transferring assessee s right over the film to Shri N. Chandra should have been ₹ 2.30 crores. Accordingly, the AO took the view that the loss suffered by the assessee should be restricted to ₹ 19 lakhs (Rs .....

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justification for the tax authorities to compare the two different transactions entered into two different periods. He submitted the market rate of any commodity would vary between two different dates depending upon various external and internal factors. He further submitted that RBEL has also transferred the Satellite rights to Pen India P Ltd and accordingly, the theatrical right was priced at ₹ 1.75 crores and the satellite rights was priced at ₹ 0.55 crores, both aggregating to & .....

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ermined between RBEL and M/s Pen India P Ltd. The Ld A.R further submitted that the assessee has taken a commercial decision to transfer its rights over the film in order to curtail further losses. He further submitted that the tax authorities are not justified in presuming that a businessman shall always make profit from business. The loss from business activities cannot be altogether avoided. He further submitted that the final production cost reached to an amount of ₹ 9.28 crores, where .....

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f ₹ 2.30 crores on a subsequent date and the said transaction shows that the assessee has transferred its rights over the film for inadequate consideration to a related party. 8. We heard the parties and perused the record. We notice from the agreement dated 09-10-2006 entered between the assessee company and M/s AFL that the assessee herein is described as assignor and M/s AFL is described as assignee . The agreement further describes the rights and liabilities of each of the above said t .....

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. The assessee has transferred its rights and liabilities obtained by it, in its capacity as assignor, to Shri N. Chandra. The transaction has taken place in the month of October, 2008. Whereas the RBEL (successor of M/s AFL) has transferred its rights and liabilities obtained by it, in its capacity as assignee, to M/s Pen India P Ltd and the said transaction has taken place in the month of July, 2009. It can be noticed that both the transactions are in respect of two different rights and furthe .....

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