TMI Blog2012 (8) TMI 1095X X X X Extracts X X X X X X X X Extracts X X X X ..... prietor of M/s. Friends India and engaged in the business of production, distribution and financing of films as well as export of feature films. The assessee was suffering from various ailments and after a long period of sickness ultimately died on 26th May, 2008. For the assessment years under consideration no return was filed by the assessee. Consequently, the AO issued a notice u/s.148 on 4.8.2009. The legal heirs of the assessee filed their return on 29.10.2010 in response to notice u/s.148. The return was accompanied with the Audit report in Form No.3CB 3CD dated 27.10.2009. The AO noticed that the profit and loss account has been credited by liabilities such as loans, sundry creditors, outstanding liability and miscellaneous receipts whereas the debit side, the assessee has written off financial assets like, loans, investment in movies and under production cost, business expenses and others total amounting to ₹ 15,16,24,167/-. The AO has observed that the return of deceased assessee was not filed as per the provisions of section 139 of the Act. The Audit report was prepared and signed by auditor on 27.10.2009 after the stipulated date and only after issue of notice u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtors which represents the advance and loans are treated as capital in nature then the financial credit which represents the loan should also be in the capital field and cannot be taxed as revenue income. As regards the investment in films, the Ld. AR has submitted that on production the cost of film comprising cost of shooting, advances given to the artists and technician. The production expenses incurred on all these constitutes expenditure with respect to incomplete or abandoned films, therefore, the said expenditure being in the ordinary course of the film business and is fully allowable as revenue and business expenditure/loss. In support of his contention he has relied upon the decision of Hon ble Madras High Court in the case of CIT vs. Crescent Films (P.) Ltd. 248 ITR 670. The Ld. AR has referred to sec.36(1)(vii) r.w.s. 36(2)(i) and submitted that all the debts are being very old and surpassing the period of limitation therefore they becomes unrecoverable and hence allowable as deduction. He has further contended that when the assessee has simultaneously write off the unrecoverable advances as well as written back the sundry creditors then the admission of the income sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision taken was an honest decision in treating the advances as gone back. He has further contended that the claim of loss cannot be accepted when there is no business. 6. We have considered the rival submissions as well as the relevant material on record. As it is evident from the earlier assessment orders as well as from the order of this Tribunal for the AY 2004-05 that the assessee was in the business of distribution, production and finance of films production. The advance/loans were given in the ordinary course of the business and not as investment in capital field. It is evident from the record and particularly from the assessment orders of the earlier years that the assessee used to give advances in connection with the business activity of the assessee. Therefore, when the business of the assessee was closed and after his death there was no chance of recovery of debts as given in the ordinary course of the business then it cannot be said that the decision taken by the legal heirs of the assessee is not an honest decision. It is pertinent to note that even if it is considered that the advances were given for film production but the same is in the nature of working capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he capital. In this case, the sum of Rs. 7,50,000 paid by the distributor would have been lost to the assessee, had the picture not been completed as the money paid him for acquiring distribution rights and without the picture, there was no likelihood of the assessee realising his investment. In order to ensure that the picture was completed, the assessee had agreed to lend money and that lending was a separate transaction and was not part of the distribution arrangement. The money so lent having been found to have become irrecoverable by reason of the picture failing at the box office and the producer being unable to repay his debts, the money so lost to the assessee was rightly held by the Commissioner and the Tribunal to be a trading loss. Learned counsel for the Revenue, however, contended that the decision of this court in the case of CIT v. Coimbatore Pictures (P.) Ltd. [1973] 90 ITR 452 should govern this case. The fact that the assessee therein was also a distributor even as the assessee here is a distributor, does not imply that that decision, without anything more, will be applicable to this case as well. A decision is to be regarded as a precedent for its ratio decid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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