TMI Blog1995 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the total income of the assessee for the year 1977-78 ? " The assessee is a registered firm doing business in the distribution of films. It had claimed an amount of Rs. 40,814 being advance of sum of Rs. 25,814 and Rs. 15,000 made in the years ending March 31, 1972, and March 31, 1973, to Iran International Films at No. 44/2, Mowbrays Road, Madras-18, towards the production of a picture named, "Allahu Akbar ". The payments were made in pursuance of an agreement dated February 21, 1972. Mr. Akthar Lufti, the main partner of the said firm had agreed to distribute the same film to some others without the knowledge of the assessee and in breach of the contract with the assessee. The assessee sent legal notice and also tried to ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Messrs. Sethu Film Distributors and Messrs. Thangam Theatre Distributors in I. T. A. No. 1167/(Mds) of 1979, dated March 9, 1981. According to the Tribunal, there is a custom in this line of business as recognised in its two earlier orders to pay advances to producers on distribution agreements being signed. The Tribunal further pointed out that the transaction was not an isolated one as in the case before the Madras High Court in the case of CIT v. Coimbatore Pictures (P.) Ltd. [1973] 90 ITR 452. Accordingly, the Tribunal allowed the claim made by the assessee as business loss, incurred during the course of the business. Learned standing counsel for the Department submitted that the Tribunal was not correct in stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract with a third party for distribution of the said film as against the contract entered into with the assessee. The assessee was unable to find out other partners and the legal heirs of the dead partner, in spite of his best efforts. The assessee has also sent notices to the other partners as well as to the legal heirs of the dead partner. Ultimately, the assessee wrote off the said amount as " bad debts " to the accounts. However, when the matter came up for consideration before the Tribunal, the Tribunal considered that it is a business loss and, therefore, allowable as revenue expenditure, since it was incurred during the course of business. The Tribunal distinguished the judgment of this court rendered in CIT v. Coimbatore Pictur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case would go to show that the decision rendered in CIT v. Coimbatore Pictures (P.) Ltd. [1973] 90 ITR 452 (Mad) would apply on all fours to the facts of the case. Our attention was drawn to another decision of this court rendered in CIT v. Sethu Film Distributors [1995] 212 ITR 620. According to the facts arising in that decision, the assessee is a registered partnership firm, carrying on business in film distribution. As per the agreement entered into with Visalakshi Films on September 30, 1964, the assessee advanced a sum of Rs. 80,000 and in consideration of the amount, the assessee was to get exhibition and exploitation rights of the picture, for distribution in certain districts for a period of ten years. The assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng money-lending business and in the course of the money-lending business, the amounts were advanced to the film-makers so as to enable the assessee to claim the loss incurred as business loss. Therefore, the decision rendered in CIT v. Sethu Film Distributors [1995] 212 ITR 620 (Mad) would render no assistance to the assessee to support his case. A decision of the Supreme Court was also brought to our notice reported in the case of CIT and CEPT v. South India Pictures Ltd. [1956] 29 ITR 910. According to the facts arising in that case, the assessee had carried on the business of distribution of films and he had entered into three agreements for advancing moneys to certain motion picture producers towards the production of three films and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Indian Income-tax Act ? ", the Supreme Court held by a majority judgment, as follows (headnote) : ". . . . that the sum paid to the assessee was not compensation for not carrying on its business but was a sum paid in the ordinary course of business to adjust the relation between the assessee and the producers ; the termination of the agreements did not radically or at all affect or alter the structure of the assessee's business ; the amount received by the assessee was only so received ' towards commission ', i.e., as compensation for the loss of the commission which it would have earned had the agreements not been terminated ; the amount was not received by the assessee as the price of any capital assets sold or surrendered or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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