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2016 (8) TMI 557 - ITAT MUMBAI

2016 (8) TMI 557 - ITAT MUMBAI - TMI - Treatment to cost of production of an abandoned film - revenue or capital expenditure - Held that:- As the cost of film under production was in the nature of stock-in-trade as per Rule 9A of the rules, that the said item was shown in current assets in the balance sheet and amortised in the year in which the film was released, that in case if the film was abandoned or scrapped the same was allowable as a revenue expenditure which included sundry creditors. - .....

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laring its total income at ₹ 2. 35Crores. The AO completed the assessment u/s. 143(3)of the Act, on 26. 11. 2013, determining the total income of the assessee at ₹ 2. 75Crores. The solitary ground raised by the AO, is as to whether the cost of production of an abandoned film can be treated as a revenue expenditure. 2. During the assessment proceedings, it was found by the AO that the assessee had written off a sum of ₹ 42, 23, 405/- on account of cost of production of incomplet .....

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the First Appellate Authority(FAA), who decided the issue in favour of the assessee relying on the decision of the Tribunal in the case of AK Films Pvt. Ltd. (ITA/5980/mum/2012), wherein it was held that cost of an abandoned feature film was allowable as a revenue expenditure, provided the film has been abandoned permanently. 4. Before us, the Department Representative (DR) supported the order of the AO. The Authorised Representative(AR) submitted that the cost of film under production was in t .....

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0 of 2013 dated 28. 01. 2015), as well as the orders of the Tribunal in the cases of M/s. Warner Bros. Pictures(I)Pvt. Ltd. (ITA/4866/Mum/2014, dated 15. 01. 2016 for AY 09-10); Abdul G. Nadiadwala (ITA/2896/Mum/2011, dt. 12. 06. 2013). 5. We have heard the rival submissions and perused the material available on record. We find that, while deciding the appeal in the case of M/s. Warner Bros. Pictures (I) Pvt. Ltd (supra), the Tribunal has decided the issue in favour of the assessee, that the Tri .....

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9, 49, 920/- incurred on account of advance for purchase of a film script for production of an abandoned film was allowable as revenue expenditure. 3. 3. 2 We find that a similar issue was before the Hon ble High Court of Bombay in the case of M/s Venus Records and Tapes Pvt. Ltd. in ITA No. 310/2013 dt. 28/01/2015, where the question for consideration was whether the cost of the abandoned film written off was revenue expenditure. The Hon ble Court dismissed revenue s appeal in that case and hel .....

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ion of the Hon ble Bombay High Court in Venus Records and Tapes P. Ltd. (supra), it has been clarified that Rule 9A of the IT Rule, 1962 is not applicable in the case of abandoned feature films. The same is extracted hereunder:- Circular No. 16/ 2015 F. No. 279/ Misc/ 140/ 2015 -ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ****** New Delhi, 6th October, 2015 Subject: - Non- applicability of Rule 9A of the income Tax Rules 1962 in the case of Aba .....

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