TMI Blog2020 (4) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... ails of capitalisation happened about 20 years back. Assessee has been subject to tax audit in the relevant assessment year and the books of account are duly audited and certified by the CA, the same was duly submitted by the AO as an alternative evidence to substantiate the interest capitalisation which the AO has not considered and made the disallowance. CIT(A) held that he is convinced with the AO s action on capitalisation interest on capitalising the interest is correct, as per law and directed the AO to include the interest on housing loan borrowed as part of the cost of acquisition. Since, the Revenue has not disputed the findings recorded by the CIT(A) with relevant material, we do not find any reason to interfere with the decision of the CIT(A) on this issue. Disallowance on assessee s claim on loss of distribution of movie relating to the movie Badrinath - CIT(A), the assessee has explained very clearly the nature and the scope of the transaction and made out the case that the amount paid to the company was at arm length which was prevalent as per normal practice in the assessee s business. The assessee has also made out that there was no unreasonableness in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.06.2011 on the property acquired from assessee s mother and sister. Further, the assessee claimed capitalisation of interest at ₹ 19,38,972/- towards which the assessee failed to submit necessary documents. Therefore, the Assessing Officer refused to allow the capitalisation of interest claimed. In the P L account, the assessee has shown purchase of lease right of the movie Badrinath at ₹ 13.5 crores produced by M/s. Allu Entertainment P Ltd. (AEPL) in which the assessee is the managing director, against which he reported ₹ 9,00,85,065/- as realization of film. He claimed cost of realization at ₹ 61,63,793/- and distribution expenses at ₹ 1,46,37,609/-. On examining the copy of agreement etc., the AO found that the assessee adopted a device through which the notional loss was created without the assessee doing any activity to avoid tax payment on capital gain by setting off of a loss and hence he has adopted that the fair market value of movie Badrinath at ₹ 6,92,83,663/- as against ₹ 13.5 crores adopted by the assessee and found that there was no gain or loss in the hands of the assessee. In other terms, he disallowed ₹ 6,57,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of film rights, the Ld AR took us through the order of the Ld. CIT(A) and submitted that the AO held that the assessee purchased lease rights from AEPL and sold the distribution rights to AEPL again, whereas, the correct position is that the assessee purchased lease rights of the film from the producer AEPL. Now having acquired the rights, the assessee has to exploit the film and hence the assessee has entered into an agreement with AEPL engaging AEPL s distribution division for doing the distribution of the film on certain commercial terms. The AO has wrongly came to a conclusion that the assessee acquired lease rights from AEPL and sold the distribution rights to AEPL which is an absurdity. In fact, the trade of distribution is an activity carried on by the distributor for an on behalf of the producer/lease right holder for a fee generally called a distribution commission. The AO has wrongly understood that there is sale of distribution rights of the film to AEPL. Therefore, the findings arrived by the AO is wrong and hence applying the McDowell s case does not arise in this case at all. 5. The assessee in the past was one of the leading producer in telugu film indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure claimed by the assessee is excessive or unreasonable with the comparable documents or material and hence, the Ld. AR pleaded that the order of the Ld. CIT(A) may be upheld. 6. We heard the rival submissions and gone through the relevant material. It is clear that the assessee, the mother of assessee and sister of the assessee acquired the impugned property during 1992. The mother of the assessee and sister of the assessee settled their portion of the land by a settlement deed dated 17.06.2011. Thereafter, the assessee has sold and claimed capital gain, Therefore, in accordance with the case law relied on in CIT vs Manujal J Shah, the period of holding is to be reckoned from the year 1992-93 for the purpose of computing cost of indexation and therefore, we do not find any reason to interfere with the order of the Ld. CIT(A). 7. With regard to the claim of interest capitalisation towards cost of acquisition, for the purpose of indexation the assessee has submitted before the ld. CIT(A) that the land was purchased during 1999-2000 relating to assessment year 2000-01. The interest paid was in connection with the acquisition which happened almost 15 to 20 years back. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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