TMI Blog1984 (6) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... on advertisement on the above two pictures, the ITO has, by applying the provisions of Section 37(3A), disallowed a sum of ₹ 2,21,839 out of it being 15 per cent of the total expenditure. The assessee's contention that his case was covered by the provisions of Section 37(3D) and that, therefore, the disallowance was not justified has been rejected by the ITO who has also rejected the assessee's alternative claim that in case a disallowance is at all justified, it would have to be restricted to ₹ 1,59,640 as the amount to be processed for disallowance under Section 37(3A) was ₹ 10,64,261 and not ₹ 14,78,920. 2. It was submitted before the Commissioner (Appeals) that the assessee had set up an 'in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the learned counsel for the assessee, submitted that there is a dichotomy between the assessee and the industrial undertaking set up by him. While the assessee has, no doubt, set up his business as a film producer, for each movie he takes up, he has to set up a separate industrial undertaking in the sense he has to select the story, give a name to the picture, get the same registered, appoint a director, choose a hero and a heroine, music director and so on and so forth. All these persons may or may not be common to all his films. Assuming that some of them are common, the agreement with each such person is entered specifically for a particular movie. In other words, the submission is that in the case of a film producer each movie requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the case of the assessee. There is also no scope for holding that each film constitutes a separate industrial undertaking, though it may constitute a separate production. 6. Having heard the parties and after going through the material on record, we find that the assessee is a well established producer. He does not own a studio. As a producer, his business is to produce movies/ pictures. Whenever, he decides to take up a movie for production, he selects a story, gives a name or title to it, gets the name registered, appoints a director, chooses a hero and a heroine, other actors and actresses, music director, play-back singers, soon and so forth. He also decides about the studio where the shootings will be done as also the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rview of Section 37(3A), in our opinion, requires careful consideration. For this purpose, it is desirable to refer to the provisions of Section 37 which read as under : (1) Any expenditure not being expenditure of the nature described in Sections 30 to 36 and Section 80VV and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head 'Profits and gains of business or profession'. ** ** ** (3D) In a case where an assessee has set up an industrial undertaking for the manufacture or production of any articles, nothing in Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicable and not those of Section 37(3A). 8. It may not be out of place to mention that our above interpretation is also justified on equitable grounds. The reason behind the provisions of Section 37(3D) appears to be that the advertisement expenditure on a new product including the movie/picture in the initial stages should be allowed in full as that is a bare necessity for the carrying on of the business while after a few years the necessity may or may not be so much. In the case of a film producer, the movie/picture is a new product which requires a separate establishment and new advertising machinery. No doubt, the banner under which it is produced has also some advertising value but the main thing is the picture or the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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