TMI Blog1987 (6) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ? " The assessee was a registered firm engaged in distribution of films and also production and sale of pictures. It produced one picture known as " Adrusta Devatha " at, a cost of Rs. 3,75,469. The picture was released on June 30, 1972. The accounting year followed by the assessee closed on September 30 of that year. The collections during the period of three months, i. e., between June 30, 1972, and September 30, 1972, came to Rs. 93,040. The assessee wrote off the entire cost of the picture as the picture ended in a flop. The Income-tax Officer, however, allowed amortisation allowance, according to the Board Circular, and, on that basis, disallowed a sum of Rs. 1,34,400. He added it back to the income returned. On appeal, the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective life of about 3 years as was presumed by the Income-tax Department when devising the formula for the amortisation of the cost of the films spelt out in the Circular dated April 9, 1959, and that, thereupon-paragraph 3 says-the matter has been carefully considered by the Board and in view of the changed situation regarding the minimum guarantee system operating in the film industry at that time, it was thought appropriate to resort to the flexible rule in every case of amortisation of the cost of the film over a period of 3 years. The Board agreed that the effective and earning life of the large majority of the films seldom exceeds one year. In this view of the matter, it stated in paragraph 4: " It has accordingly been decided that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss films, " the entire cost of production may be allowed in the very first year of production if the film was released in the first half of the accounting year. In case the film was released in the second half of the accounting year, the value of the film should be taken at 50% of the cost of production at the end of that accounting year and the balance 50% should be adjusted in the second year..." (In this case, we are not concerned with the other directions given in the said circular). Now, according to the cost of production of the film with which we are concerned herein, it falls under class " C ". If Circular No. 30 applies, then the assessee is entitled to write off the entire cost of production in the year in which the picture is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the said decision, it was held that the Circular dated October 4, 1969, was admittedly in force during the accounting years relevant to the assessment years concerned therein. In that case, the assessee was adopting the calendar year as his accounting year. The accounting years relevant in that case were January 1, 1970, to December 31, 1970, and January 1, 1971, to December 31, 1971, for which the assessment years were 1971-72 and 1972-73. It was held that " the circular that was in force during the year of assessment is the circular that should be applied while granting deductions under the relevant provisions of the Income-tax Act ". Having enunciated the said principle, the Bench held that inasmuch as Circular No. 30 issued in the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular was withdrawn, the assessee's claim for extending the benefit of the 1944 circular to him was denied. The Tribunal, however, agreed with the assessee, When the matter came up to the High Court, the Full Bench held that inasmuch as the 1944 circular was in force and in operation throughout the assessment year 1971-72 and was withdrawn only after the expiry of the said assessment year, the assessee was entitled to the benefit of the 1944 circular. The Full Bench affirmed the principle that the instructions contained in the circular of the Central Board of Revenue, which was in force on the first day of the assessment year, would be applicable and the Income-tax Officer would be bound by it, even though he passed the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
