Shri. Vijaykumar Thimmegowda, Bengaluru V. Commissioner of Income Tax (Appeals)-3, Bengaluru

ITA 2928/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3902 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 29-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Business income; Set aside
• Section: 64; 2(A); 13

Judgement Text

ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2928/BANG/2017 ASSESSMENT YEAR: 2014-15 SHRI VIJAYKUMAR THIMMEGOWDA NO.1312, 11 TH MAIN VIJAYANAGAR BENGALURU-560040 PAN NO : AGDPK4985F VS. ITO WARD-3(2)(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF H EARING : 19.10.2020 DATE OF PRONOUNCEMENT : 02.11.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 13.11.2017 PASSED BY LD. CIT(A)-3, BENGALURU AND IT RELATES TO ASSESSMENT YEAR 2014-15. ALL THE GROUNDS URGED BY THE ASSESSEE ARE DIRECTED AGAINST A SINGLE ISSUE, VIZ., WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING ASSESSMENT OF RS.5.75 CRORE S, BEING THE AMOUNT RECEIVED ON SALE OF TV RIGHTS AND AUDIO RIGH TS OF A FEATURE FILM SEPARATELY, INSTEAD OF TREATING THE SAME AS PA RT OF RECEIPT ON EXHIBITION OF FILM ON COMMERCIAL BASIS. ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 2 OF 14 2. THE FACTS RELATING TO THE ABOVE ISSUE ARE ST ATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRODUCTION O F FEATURE FILMS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE P RODUCED A FEATURE FILM IN KANNADA LANGUAGE AND RELEASED THE S AME ON 13.1.2014. THE ASSESSEE HIMSELF EXHIBITED FILM ON COMMERCIAL BASIS IN CERTAIN AREAS. HE ALSO SOLD AUDIO AND TV RIGHTS OF THE FILM. THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE DURING THE YE AR UNDER CONSIDERATION IS GIVEN BELOW:- A) RECEIPTS FROM EXHIBITION OF FILM IN CERTAIN AREAS BY APPELLANT RS.5,40,10,756/- B) SALE OF AUDIO RIGHTS RS. 15,00,000/- C) SALE OF T.V. RIGHTS RS.5,60,00,000/- TOTAL RS.11,15,10,756/- THE ASSESSEE HAD INCURRED EXPENDITURE TO THE TUNE O F RS.14,94,89,613/- ON PRODUCTION OF THE FILM. THE A SSESSEE COMPUTED HIS INCOME FROM BUSINESS AS PER RULE 9A(3)(C) OF I. T. RULES, WHICH PERMITTED THE ASSESSEE TO SET OFF THE EXPENDITURE O N PRODUCTION OF FILM AGAINST GROSS RECEIPTS ON EXHIBITION OF FILM O N COMMERCIAL BASIS AND ALLOWED CARRY FORWARD OF REMAINING UNCLAIMED EX PENDITURE TO THE NEXT YEAR, IF THE FILM IS NOT RELEASED ON A COMMERC IAL BASIS ATLEAST 90 DAYS BEFORE THE END OF THE SUCH PREVIOUS YEAR. WE HAVE NOTICED EARLIER THAT THE FILM WAS RELEASED ONLY ON 13.1.201 4 AND HENCE THE PERIOD OF RELEASE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2014-15 WAS LESS THAN 90 DAYS. HENCE THE ASSE SSEE AVAILED THE BENEFIT OF RULE 9A(3)(C) OF I T RULES. ACCORDINGLY , THE ASSESSEE SET OFF THE PRODUCTION EXPENDITURE AGAINST GROSS RECEIPTS O F RS.11,15,10,756/- (REFERRED ABOVE) AND CARRIED FORW ARD REMAINING UNCLAIMED EXPENDITURE OF RS.3,79,78,857/- TO NEXT Y EAR. 3. THE A.O. NOTICED THAT, AS PER RULE 9A(3)(C) OF I .T. RULES, THE EXPENDITURE ON PRODUCTION OF FILM SHOULD BE RESTRIC TED TO THE AMOUNT REALISED BY THE FILM PRODUCER BY EXHIBITING THE FIL M ON COMMERCIAL ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 3 OF 14 BASIS OR SELLING THE RIGHTS OF EXHIBITION OF THE FI LM. IN THE INSTANT CASE, THE A.O. NOTICED THAT THE ASSESSEE DID NOT SE LL RIGHTS OF EXHIBITION OF FILM IN ANY AREA. THE A.O. NOTICED T HAT THE ASSESSEE HAS INCLUDED THE RECEIPTS FROM SALE OF AUDIO RIGHTS AND T.V. RIGHTS ALSO IN COMPUTING THE AMOUNT REALISED FROM EXHIBITION OR SA LE OF RIGHTS OF EXHIBITION. THE A.O. TOOK THE VIEW THAT THE EXPRES SION AMOUNT REALISED FROM EXHIBITION OF FILM ON A COMMERCIAL BA SIS USED IN RULE 9A(3)(C) SHOULD NOT BE CONSTRUED TO INCLUDE ALL REC EIPTS FROM FILM SUCH AS SALE OF AUDIO RIGHTS, T.V. RIGHTS. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE AMOUNT RECEIVED BY THE ASSESSEE ON SA LE OF AUDIO RIGHTS AND TV RIGHTS AGGREGATING TO RS.5.75 CRORES CANNOT BE INCLUDED IN THE CATEGORY OF RECEIPTS FROM EXHIBITION OF FILMS. B EFORE AO, THE ASSESSEE PLACED HIS RELIANCE ON THE DECISION RENDER ED BY MUMBAI BENCH OF ITAT IN THE CASE OF VIESHESH FILMS (P) LTD VS. DCIT, WHEREIN IT WAS HELD THAT THE MODE OF EXHIBITION WAS NOT PRE SCRIBED IN THE RULE AND THAT EXHIBITION OF FILMS ON TV WILL CLEARLY FAL L UNDER THE AMBIT OF RULE 9A. THE AO, HOWEVER, EXPRESSED THE VIEW THAT T HE FACTS OF THE ABOVE SAID CASE ARE DIFFERENT, I.E., THE ASSESSEE B EFORE MUMBAI BENCH OF ITAT EXHIBITED FILM EXCLUSIVELY ON TV AND IN THA T CONTEXT ONLY, THE TRIBUNAL HAS HELD THAT THE MODE OF EXHIBITION WAS N OT PRESCRIBED UNDER RULE 9A AND HENCE THE PRODUCER CAN CHOOSE TO EXHIBIT THROUGH ANY MODE. IN THE INSTANT CASE, THE ASSESSEE HAS E XHIBITED THE FILM HIMSELF IN CERTAIN AREAS. FURTHER, THE AO EXPRESSE D THE VIEW THAT RULE 9A(3)(C) USES THE PHRASE HIMSELF EXHIBITS FIL M ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELL THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS. ATTACHING IMPORTANCE TO THE WORD AREAS USED IN RULE 9A(3)(C), THE AO E XPRESSED THE VIEW THAT THE SAME SUGGESTS EXHIBITION IN DIFFERENT GEOG RAPHICAL REGIONS AND NOT THROUGH DIFFERENT MEDIUMS. 4. ACCORDINGLY, THE A.O. HELD THAT THE RECEIPT B Y WAY OF SALE OF AUDIO RIGHTS AND TV RIGHTS DOES NOT FALL UNDER THE CATEGO RY OF RECEIPTS FROM ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 4 OF 14 EXHIBITION OF FILMS PRESCRIBED UNDER RULE 9A OF IT RULES. SINCE RULE 9A ALLOWS DEDUCTION OF PRODUCTION EXPENSES AGAINST RECEIPT FROM EXHIBITION OF FILMS ONLY, THE AO DID NOT ALLOW SET OFF OF EXPENDITURE ON PRODUCTION AGAINST THE AMOUNT OF RS.5.75 CRORES REL ATING TO SALE OF AUDIO RIGHTS AND TV RIGHTS. ACCORDINGLY, HE ASSESS ED THE ABOVE SAID AMOUNT OF RS.5.75 CRORES AS INCOME OF THE ASSESSEE. 5. THE ASSESSEE CHALLENGED THE ABOVE SAID ADDITION BY FILING APPEAL BEFORE LD. CIT(A). THE FIRST APPELLATE AUTH ORITY AGREED WITH THE VIEW OF THE AO THAT RULE 9A TALKS ABOUT THE AR EAS. HE HELD THAT IF THE ARGUMENT OF THE APPELLANT THAT THE SALE OF TV RIGHTS AND SALE OF AUDIO RIGHTS SHOULD ALSO BE CONSIDERED AS SELLIN G THE RIGHTS OF EXHIBITION OF THE FILM, THEN THE PROVISIONS OF RULE 9A(3)(A)(B)(C) WOULD BECOME INFRUCTUOUS AS THE SALE OF TV RIGHTS A ND AUDIO RIGHTS CANNOT BE SAID TO BE IN RELATION TO THE AREA NOT CO VERED BY (I) AS ABOVE SUCH RIGHTS WILL OVERLAP WITH AREA COVERED BY (I), I.E., WHERE THE FILM PRODUCER HIMSELF CHOOSES TO EXHIBIT FILM O N A COMMERCIAL BASIS, AS SUCH TV RIGHTS AND AUDIO RIGHTS ALLOW THE BUYER TO EXERCISE SUCH RIGHTS IN SUCH GEOGRAPHICAL AREAS WHERE THE AP PELLANT HAS HIMSELF EXHIBITED THE FILM IN THEATRES. 6. BEFORE LD. CIT(A) THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY MUMBAI BENCH OF ITAT IN THE CASE OF VIE SHESH FILMS (P) LTD. VS. DCIT (2008) 26 SOT 64 (MUM) AND ALSO THE D ECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF M/S. LAXMI VIDEO THEATRES AND OTHERS VS. STATE OF HARYANA AND OTHERS (1993) 3 SCC 715. THE LD CIT(A), HOWEVER, HELD THAT THESE DECISIONS ARE N OT APPLICABLE TO THE FACTS OF THE CASE. THE OBSERVATIONS MADE BY LD CIT(A) ARE EXTRACTED BELOW:- 4.6 IN ADDITION TO ABOVE, THE RULE 9A(7)(II) PROVI DES THAT THE RIGHT OF EXHIBITION OF A FEATURE FILM SHALL BE DEEM ED TO HAVE BEEN SOLD ONLY ON THE DATE WHEN THE POSITIVE PRINTS OF T HE FILM ARE DELIVERED BY THE FILM PRODUCER TO THE PURCHASER OF SUCH RIGHTS. IN CASE OF SALE OF T.V. RIGHTS AND AUDIO RIGHTS, NO SU CH DELIVERY OF POSITIVE PRINTS OF THE FILM IS REQUIRED TO BE DONE. A PERUSAL OF THE CLAUSE 2(C) OF THE AGREEMENT FOR SALE OF T.V. RIGHT S, AS ENTERED INTO ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 5 OF 14 BY THE APPELLANT SHOWS THAT THE APPELLANT IS ONLY R EQUIRED TO HAND OVER THE DIGITAL INTERMEDIATE DATA FILES OF THE FIL M EITHER ON A HARD DISC/LTO (LINEAR TAPE OPEN) BACK UP DIVIDE, DPX FIL E AND HD COPY WITH 5.1 AUDIO. SIMILARLY, FOR SALE OF AUDIO RIGHT S NO SUCH DELIVERY OF POSITIVE PRINTS OF THE FILM IS REQUIRED TO BE DO NE. SO, FROM THIS ALSO THE ONLY CONCLUSION WHICH CAN BE DRAWN IS THAT THE EXHIBITION OF FEATURE FILM AS REFERRED TO IN RULE 9A(3) DOES N OT INCLUDE SALE OF TV RIGHTS OR SALE OF AUDIO RIGHTS. 4.7 THE RELIANCE OF THE APPELLANT ON RULE 9A(6) IS ALSO MISPLACED AS THE APPLICABILITY OF THE SAID RULE WILL COME INT O THE PICTURE IF RULE 9A(2)(3) CANNOT BE APPLIED. RULE 9A(6) WOULD BECOM E APPLICABLE IF THE RIGHTS OF THE EXHIBITION OF THE FEATURE FILM HA VE BEEN TRANSFERRED BY THE FILM PRODUCER BY A MODE NOT COVERED BY THE O THER PROVISIONS OF RULE 9A. THIS RULE THUS ALSO REFERS TO REVENUE FROM SALE OF RIGHTS OF EXHIBITION OF FEATURE FILM AND NOT FROM SALE OF T.V. RIGHTS OR AUDIO RIGHTS. SINCE RULE 9A(3) CAN BE APPLIED TO THE FAC TS OF THE CASE, SO INVOKING RULE 9A(6) TO DETERMINE THE DEDUCTION IN R ESPECT OF THE COST OF THE PRODUCTION OF THE FILM IS NOT REQUIRED. THE APPELLANT HAS RELIED ON THE DECISION RENDERED IN THE CASE OF VIES HESH FILMS (P) LIMITED VS. DCIT (2008) 27 CCH 0628 BY ITAT MUMBAI BENCH TO SUPPORT ITS ARGUMENTS. THIS ISSUE HAS BEEN DISCUSS ED BY THE A.O. IN PARA 4.4 AND 4.5 OF HIS ORDER AND HE HAS DISTINGUIS HED THE FACTS OF THE CASE. IT IS FURTHER NOTED THAT THE SPECIFIC PR OVISIONS CONTAINED IN RULE 9A(7)(II) OF THE IT RULES WERE ALSO NOT DISCUS SED IN THE SAID CASE. SO, THE DECISION IN THE SAID CASE CANNOT BE APPLIED TO THE CASE UNDER CONSIDERATION. 4.8 THE RELIANCE OF THE APPELLANT ON THE DECISION O F SUPREME COURT IN THE CASE OF LAXMI VIDEO THEATERS VS. STATE OF HARYANA AND OTHERS AIR 1993 SC 238 IS ALSO MISPLACED AS THE ISS UE OF TAXABILITY OF INCOME FROM PRODUCTION OF FEATURE FILM OR APPLIC ABILITY OF RULE 9A OF THE INCOME TAX RULE WAS NEVER UNDER CONSIDERATIO N. IN THE SAID CASE, THE SC HELD THAT EXHIBITION OF PICTURES USING VCRS/VCP IN THE VIDEO PARLOURS WOULD REQUIRE THE EXHIBITOR TO OBTAI N A LICENSE IN ACCORDANCE WITH THE PROVISIONS OF CINEMATOGRAPH ACT 1952. THIS IS FOR THE REASON THAT VCR/VCP WERE BEING USED FOR PUB LIC SCREENING OF THE FILMS. IN THE CASE UNDER CONSIDERATION, THE SALE OF T.V RIGHTS AND AUDIO RIGHTS IN ITSELF DO NOT AMOUNT TO PUBLIC SCREENING AS THE MAJORITY OF VIEWERSHIP WOULD BE CONFINED TO HOMES. EVEN IF THE PURCHASER RESORTS TO PUBLIC EXHIBITION OF THE FILM ON T.V., THE SALE CONSIDERATION CANNOT BE CONSIDERED TO BE RELATING T O THE SAME ALONE. IN ABSENCE OF ANY SUCH SPECIFIC DETAILS IN THE AGRE EMENT, THE ENTIRE CONSIDERATION HAS TO BE CONSIDERED FOR GENERAL VIEW ERSHIP OF THE T.V., WHICH IS AT HOME. ACCORDINGLY, THE LD CIT(A) CONFIRMED THE ORDER PASS ED BY AO AND HENCE THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 6 OF 14 7. THE LD A.R SUBMITTED THAT THE PHRASE EXHIBI TION OF FILMS ON COMMERCIAL BASIS SHOULD NOT BE RESTRICTED TO TRADI TIONAL METHOD OF EXHIBITION IN THEATRES. HE SUBMITTED THAT THE TECH NOLOGICAL CHANGE AND ADVANCEMENT HAS MADE EXHIBITION OF FILMS POSSIB LE IN DIFFERENT MODES/MEDIUMS. HENCE THE MEANING OF ABOVE SAID PHR ASE SHOULD BE EXTENDED TO ALL POSSIBLE MODES/MEDIUMS AS PER TE CHNOLOGICAL ADVANCEMENT, AS THE ULTIMATE PURPOSE OF EXHIBITION OF FILMS IS TO REACH IT FOR PUBLIC AT LARGE VIEWING. HE SUBMITTED THAT THIS ASPECT OF TECHNOLOGICAL ADVANCEMENT AND CHANGE WAS RECOGNISED BY HONBLE SUPREME COURT IN THE CASE OF M/S LAXMI VIDEO THEATR ES AND OTHERS (SUPRA). HE FURTHER SUBMITTED THAT THE TAX AUTHORI TIES ARE NOT RIGHT IN HOLDING THAT THE DECISION RENDERED BY MUMBAI BEN CH OF TRIBUNAL IN THE CASE OF VIESHESH FILMS (P) LTD (SUPRA) IS NO T APPLICABLE. HE SUBMITTED THAT THE TRIBUNAL HAS HELD IN CLEAR TERMS THAT THE MODE OF EXHIBITION IS NOT PRESCRIBED IN THE RULES AND HENCE THE EXHIBITION OF FILMS ON TELEVISION WOULD FALL WITHIN THE AMBIT OF RULE 9A OF I T RULES. ACCORDINGLY, THE LD A.R CONTENDED THAT THE AMOUNT R ECEIVED BY THE ASSESSEE ON SALE OF AUDIO RIGHTS AND TV RIGHTS SHOU LD BE INCLUDED IN RECEIPTS FROM EXHIBITION OF FILMS. 8. ON THE CONTRARY, THE LD D.R STRONGLY SUPPORTE D THE ORDER OF LD CIT(A). IN THE ALTERNATIVE, THE LD DR SUBMITTED TH AT THE MATTER MAY BE RESTORED TO THE FILE OF THE AO FOR EXAMINING THE CLAIMS OF THE ASSESSEE AFRESH. 9. WE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.15.00 LAKHS O N SALE OF AUDIO RIGHTS OF FILM PRODUCED BY IT AND RS.5.60 CRORES ON SALE OF TV RIGHTS OF THE SAME FILM. THE QUESTION THAT ARISES FOR OUR CONSIDERATION IS WHETHER THESE TWO RECEIPTS FALL UNDER THE CATEGORY OF AMOUNT REALISED ON EXHIBITION OF FILM ON A COMMERCIAL BASI S. THIS QUESTION ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 7 OF 14 ARISES FOR THE REASON THAT THE ASSESSEE HAS COMPUTE D ITS INCOME UNDER RULE 9A OF INCOME TAX RULES. THE PROVISIONS OF SUB-RULE (3) TO RULE 9A ARE RELEVANT HERE AND THEY ARE EXTRACTED BE LOW:- 9A. (1) IN COMPUTING THE PROFITS AND GAINS OF THE BUSIN ESS OF PRODUCTION OF FEATURE FILMS CARRIED ON BY A PERSON (THE PERSON CARRYING O N SUCH BUSINESS HEREAFTER IN THIS RULE REFERRED TO AS FILM PRODUCER), THE DEDUCTION I N RESPECT OF THE COST OF PRODUCTION OF A FEATURE FILM CERTIFIED FOR RELEASE BY THE BOAR D OF FILM CENSORS IN A PREVIOUS YEAR SHALL BE ALLOWED IN ACCORDANCE WITH THE PROVIS IONS OF SUB-RULE (2) TO SUB-RULE (4). EXPLANATION : IN THIS RULE, (I) BOARD OF FILM CENSORS MEANS THE BOARD OF FILM CEN SORS CONSTITUTED UNDER THE CINEMATOGRAPH ACT, 1952 (37 OF 1952); (II) COST OF PRODUCTION, IN RELATION TO A FEATURE FILM , MEANS THE EXPENDITURE INCURRED ON THE PRODUCTION OF THE FILM, NOT BEING (A) THE EXPENDITURE INCURRED FOR THE PREPARATION OF THE POSITIVE PRINTS OF THE FILM; AND (B) THE EXPENDITURE INCURRED IN CONNECTION WITH THE ADV ERTISEMENT OF THE FILM AFTER IT IS CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS:] [ PROVIDED THAT THE COST OF PRODUCTION OF A FEATURE FILM, SHA LL BE REDUCED BY THE SUBSIDY RECEIVED BY THE FILM PRODUCER UNDER ANY SCH EME FRAMED BY THE GOVERNMENT, WHERE SUCH AMOUNT OF SUBSIDY HAS NOT BE EN INCLUDED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR ANY ASSESSMENT YEAR.] (2) WHERE A [***] FEATURE FILM IS CERTIFIED FOR REL EASE BY THE BOARD OF FILM CENSORS IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR, (A) THE FILM PRODUCER SELLS ALL RIGHTS OF EXHIBITION OF THE FILM, THE ENTIRE COST OF PRODUCTION OF THE FILM SHALL BE ALLOWED AS A DEDUCT ION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; OR (B) THE FILM PRODUCER (I) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR (II) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPE CT OF SOME OF THE AREAS; OR (III) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN R ESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS RELEASED FOR EXHIBITION ON A COMMER CIAL BASIS AT LEAST [NINETY] DAYS BEFORE THE END OF SUCH PREVIOUS YEAR, THE ENTIRE CO ST OF PRODUCTION OF THE FILM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR. (3) WHERE A FEATURE FILM IS CERTIFIED FOR RELEASE B Y THE BOARD OF FILM CENSORS IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR, THE FI LM PRODUCER ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 8 OF 14 (A) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS; OR (B) SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPE CT OF SOME OF THE AREAS; OR (C) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, AND THE FILM IS NOT RELEASED FOR EXHIBITION ON A COMMERCIAL BASIS A T LEAST [NINETY] DAYS BEFORE THE END OF SUCH PREVIOUS YEAR, THE COST OF PRODUCTION OF THE FILM IN SO FAR AS IT DOES NOT EXCEED THE AMOUNT REALISED BY TH E FILM PRODUCER BY EXHIBITING THE FILM ON A COMMERCIAL BASIS OR THE AMOUNT FOR WHICH THE RIGHTS OF EXHIBITION ARE SOLD OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNT S REALISED BY THE FILM PRODUCER BY EXHIBITING THE FILM AND BY THE SALE OF THE RIGHT S OF EXHIBITION, SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF S UCH PREVIOUS YEAR; AND THE BALANCE, IF ANY, SHALL BE CARRIED FORWARD TO THE NE XT FOLLOWING PREVIOUS YEAR AND ALLOWED AS A DEDUCTION IN THAT YEAR. 10. IN THE INSTANT CASE, THE FILM WAS RELEASED O N 13.01.2014 ON A COMMERCIAL BASIS AND HENCE THE PERIOD OF RELEASE WA S LESS THAN 90 DAYS AND HENCE THE INCOME HAS TO BE COMPUTED AS PER CLAUSE (C) OF SUB-RULE (3) OF RULE 9A. 11. WE HAVE NOTICED THAT THE TAX AUTHORITIES HA VE GIVEN IMPORTANCE TO THE WORD AREAS OCCURRING IN RULE 9A AND ACCORD INGLY, THEY HAVE TAKEN THE VIEW THAT THE AMOUNT REALISED ON EXHIBITI ON OF FILM ON A COMMERCIAL BASIS WOULD COVER ONLY THEATRICAL RELEAS E MADE IN VARIOUS AREAS. THE LD CIT(A) HAS ACCORDINGLY, HELD THAT TH E SALE OF TV RIGHTS WOULD VIOLATE THE CONDITION OF EXHIBITION OF FILMS IN DIFFERENT AREAS, I.E., EXHIBITION THROUGH TV WOULD VIOLATE AREA REST RICTIONS. THE LD CIT(A) HAS FURTHER HELD THAT THE EXHIBITION OF FILM S THROUGH POSITIVE PRINTS ALONE WOULD BE COVERED BY RULE 9A OF I T RUL ES. 12. IN THE CASE OF LAXMI VIDEO THEATRES AND OTHERS (SUPRA), QUESTION THAT AROSE BEFORE THE HONBLE SUPREME COUR T WAS WHETHER EXHIBITION OF FILMS THROUGH PRE-RECORDED CASSETTE B Y WAY OF VCR/VCP WOULD BE COVERED BY PUNJAB CINEMAS (REGULATION) ACT , 1952. IT WAS HELD AS UNDER BY HONBLE SUPREME COURT:- ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 9 OF 14 7. WE ARE IN AGREEMENT WITH THIS VIEW. THE DEFINI TION OF THE EXPRESSION CINEMATOGRAPH CONTAINED IN SECTION 2(C ) OF THE CINEMATOGRAPH ACT, 1952 AND SECTION 2(A) OF THE ACT IS AN INCLUSIVE DEFINITION WHICH INCLUDES ANY APPARATUS FOR REPRESE NTATION OF MOVING PICTURES OR SERIES OF PICTURES. THE SAID DE FINITION CANNOT BE CONFINED IN ITS APPLICATION TO AN APPARATUS FOR REP RESENTATION OF MOVING PICTURES OR SERIES OF PICTURES WHICH WAS KNO WN ON THE DATE OF THE ENACTMENT OF THE SAID PROVISION. IT MUST BE GIVEN A MEANING WHICH TAKES INTO ACCOUNT THE SUBSEQUENT SCIENTIFIC DEVELOPMENTS IN THEFIELD IN ACCORDANCE WITH PRINCIPLE OF STATUTORY CONSTRUCTION LAID DOWN IN SENIOR ELECTRIC INSPECTOR V. LAXMI NARAYAN CHOPRA. IN THAT CASE IT HAS BEEN HELD [I]N A MODERN PROGRESSIVE SOCIETY IT WOULD BE UNREASONABLE TO CONFINE THE INTENTION OF A LEGISLAT URE TO THE MEANING ATTRIBUTABLE TO THE WORD USED AT THE TIME T HE LAW WAS MADE, FOR A MODERN LEGISLATURE MAKING LAWS TO GOVERN A SO CIETY WHICH IS FAST MOVING MUST BE PRESUMED TO BE AWARE OF AN ENLA RGED MEANING THE SAME CONCEPT MIGHT ATTRACT WITH THE MARCH OF TI ME AND WITH THE REVOLUTIONARY CHANGES BROUGHT ABOUT IN SOCIAL, ECON OMIC, POLITICAL AND SCIENTIFIC AND OTHER FIELDS OF HUMAN ACTIVITY. INDEED, UNLESS A CONTRARY INTENTION APPEARS, AN INTERPRETATION SHOUL D BE GIVEN TO THE WORDS USED TO TAKE IN NEW FACTS AND SITUATIONS, IF THE WORDS WERE CAPABLE OF COMPREHENDING THEM. 8. THE VCR/VCP WERE DEVELOPED IN 1970S AND ACHIEVE THE SAME PURPOSE AS THE TRADITIONAL MEDIA FOR EXHIBITIO N OF MOVING PICTURES. THERE IS NOTHING IN THE ACT WHICH EXCLUD ES THE APPLICABILITY OF THE ACT TO VCR/VCP. 9. THE HIGH COURT WAS, THEREFORE, RIGHT IN HOLDING THAT VCR/VCP ARE WITHIN THE AMBIT OF THE DEFINITION OF CINEMATOGRAPH CONTAINED IN SECTION 2(A) OF THE ACT AND THE APPELL ANTS IN ORDER TO CARRY ON THE BUSINESS OF RUNNING VIDEO PARLOURS/OR SHOWING PRE- RECORDED CASSETTES OF FILMS THROUGH THE MEDIUM OF V CR/VCP MUST OBTAIN A LICENSE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THE RULES. IN THE PAST, THE ONLY WAY OF EXHIBITION OF COMMERCI AL FILMS WAS THROUGH THEATRICAL RELEASE OF FILMS ONLY, I.E., EXH IBITION THROUGH PROJECTOR USING POSITIVE PRINTS OF FILMS. DUE TO T ECHNICAL CHANGE AND ADVANCEMENT, THIS METHOD HAS BEEN REPLACED BY DIGIT AL MODE. FURTHER, DUE TO ADVENT OF TELEVISION AND VARIOUS CO MMERCIAL CHANNELS, THE SCOPE OF MODE OF RELEASING OF EXHIBIT ION ON COMMERCIAL ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 10 OF 14 BASIS HAS ALSO UNDERGONE SEA CHANGE. IN FACT, THE TV CHANNELS HAVE THEIR FOOT PRINTS ALL OVER THE WORLD. HENCE, IN THE PRESENT MODERN SOCIETY, IT IS POSSIBLE FOR THE PRODUCER OF FILM TO RELEASE THROUGH THEATRES, THROUGH TV CHANNELS AND ALSO THROUGH OTT PLATFORM. HENCE, UNDER THE CHANGING CIRCUMSTANCES, IT WOULD N OT BE APPROPRIATE TO GIVE LITERAL MEANING TO RULE 9A(3)(C ) OF THE IT RULES, WHICH READS AS UNDER:- THE FILM PRODUCER HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BASIS IN CERTAIN AREAS AND SELLS THE RIGHTS OF EXHIBITION OF THE FIL M IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS I.E., IT MAY NOT BE CORRECT TO GIVE IMPORTANCE TO T HE WORD AREAS OCCURRING IN THE ABOVE SAID PROVISION AND HOLD THAT THERE SHOULD BE CLEAR DEMARCATION OF THE AREAS BETWEEN THE PRODUCER AND DISTRIBUTORS. IN OUR CONSIDERED VIEW, THE PRIMARY IMPORTANCE SHOULD BE GIVEN TO THE EXPRESSION EXHIBITION OF FILM ON A COMMERCIAL BASIS. IN FACT, A CAREFUL PERUSAL OF THE ABOVE SAID PROVIS ION WOULD SHOW THAT THE FILM PRODUCER CAN SELL THE RIGHTS OF EXHIBITION OF FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS, DESPITE HE HIMSEL F EXHIBITS THE FILM ON A COMMERCIAL BASIS. THE USE OF WORD ALL WOULD SHOW THAT THERE IS NO AREA RESTRICTION AS OBSERVED BY LD CIT( A), I.E., IT IS THE COMMERCIAL CONVENIENCE OF THE PARTIES CONCERNED. H ENCE THE MAIN THRUST SHOULD BE ON EXHIBITION OF FILM ON A COMMER CIAL BASIS. FURTHER, DUE TO TECHNICAL ADVANCEMENT, IT IS NOW PO SSIBLE TO SELL AUDIO RIGHTS SEPARATELY APART FROM EXHIBITION OF FE ATURE FILMS. AUDIO MATTER IS PART OF FEATURE FILM AND IS PART OF PRODU CTION OF FEATURE FILM. NOWADAYS, BOTH AUDIO & VIDEO FORM INTEGRAL PART OF A FEATURE FILM. IN FACT, A FEATURE FILM WITHOUT AUDIO IS RAREST OF RAR E FEATURE. THE COST OF PRODUCTION OF FEATURE FILM INCLUDES EXPENDITURE ON AUDIO RECORDING. HENCE, WE ARE OF THE VIEW THAT THE AUDIO MATTER CAN NOT BE VIEWED SEPARATELY DISTINCT FROM THE FEATURE FILM, SINCE IT IS INTRICATELY CONNECTED WITH THE FEATURE FILM. THERE SHOULD NOT BE ANY DISPUTE ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 11 OF 14 THAT, IN THE INDIAN FILM SCENARIO, SONGS FORM INTEG RAL PART OF THE FEATURE FILM AND MANY A TIMES, MANY FILMS TURNED OU T TO BE SUCCESSFUL DUE TO SONGS. PUBLIC AT LARGE COULD VISU ALISE THE FILM SCENES ON HEARING THE SONGS. HENCE, IT WAS MADE PO SSIBLE TO ASSIGN THE AUDIO RIGHTS OF FILMS/SONGS SEPARATELY. HENCE, WE ARE OF THE VIEW THAT SALE OF AUDIO RIGHTS SHOULD FORM PART OF AMOUN T REALISED ON EXHIBITION OF FILMS ON COMMERCIAL BASIS. ACCORDING LY, WE ARE OF THE VIEW THAT THE AMOUNT REALISED ON SALE OF AUDIO RIGH TS AND TV RIGHTS WOULD FALL UNDER THE CATEGORY OF EXHIBITION OF FIL M ON A COMMERCIAL BASIS. 13. WE FIND SUPPORT FOR OUR VIEW FROM THE DECIS ION RENDERED BY MUMBAI BENCH OF TRIBUNAL IN THE CASE OF VIESHESH FI LMS (P) LTD (SUPRA). IN THIS CASE, THE ASSESSEE ARGUED THAT TH E RELEASE OF FILM IN TV CHANNELS WOULD NOT FALL UNDER RULE 9A OF THE ACT . THE FACTS OF THIS CASE ARE THAT THE ASSESSEE PRODUCED TWO FILMS VIZ., GHULAM AND ASHIQUE. THE ASSESSEE INCURRED LOSS OF RS.99.91 LAK HS IN RESPECT OF ASHIQUE. THE ASSESSEE SOUGHT OF SET OFF THIS LOSS AGAINST ITS BUSINESS INCOME. IT OBJECTED TO THE APPLICATION OF RULE 9A ON THE GROUND THAT THIS FILM WAS INTENDED TO BE SOLD TO TV CHANNELS ON LY AND NOT FOR THEATRICAL RELEASE AND HENCE RULE 9A WAS NOT APPLIC ABLE. IT WAS CONTENDED THAT RULE 9A/9B WERE APPLICABLE TO FEATUR E FILM MEANT FOR THEATRICAL RELEASE AND COULD NOT BE APPLIED TO THE FILM MADE EXCLUSIVELY FOR RELEASE ON TV. THE VIEW TAKEN BY L D CIT(A) HAS BEEN NARRATED AS UNDER BY THE TRIBUNAL:- THE LD. CIT(A), THEREAFTER, ANALYZED THE PROVISION S OF RULE 9A AND HELD THAT IN THE WORDINGS OF RULE 9A THERE WAS NO REFERENCE T O MODE OF RELEASE OF FILM AND, THEREFORE, THE CONTENTION OF THE ASSESSEE THAT ONLY FEATURE FILMS, WHICH WERE PRODUCED FOR THEATRICAL RELEASE ONLY FELL WITH IN THE AMBIT OF RULE 9A WAS NOT TENABLE. THE LD. CIT(A) FURTHER HELD THAT R ULE 9A WAS APPLICABLE WHERE A FEATURE FILM WAS EXHIBITED BY THE PRODUCER HIMSELF AND/OR RIGHTS OF ITS EXHIBITION WERE SOLD, HENCE, WHEN FEATURE FILM WAS EXHIBITED THROUGH THE MEDIUM OF TELEVISION ALSO FELL WITHIN THE AMBIT OF RULE 9A. THE LD. CIT(A) ALSO HELD THAT THE TERM 'FEATURE FILM' WAS NOWHERE DEFINED IN THE INCOME-TAX ACT AND AS PER GENERAL UNDERSTANDING, IT WAS FULL L ENGTH FILM, TO BE SHOWN IN ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 12 OF 14 ONE GO, HENCE, ONCE THIS FILM WAS CERTIFIED BY THE CENSOR BOARD AS A FEATURE FILM, RULE 9A BECAME APPLICABLE. THE LD. CIT(A) ALS O HELD THAT THE EXHIBITION REFERRED TO IN RULE 9A, DID NOT MEAN THE EXHIBITION OF FEATURE FILM COMPULSORILY IN THEATRES ONLY AND ONCE A FILM WAS, CERTIFIED FOR RELEASE BY BOARD OF FILM CENSOR IN A PREVIOUS YEAR, COST OF PR ODUCTION OF SUCH FILM WAS TO BE ALLOWED IN ACCORDANCE WITH THE PROVISIONS OF SUB-RULE (2) TO SUB-RULE (4) OF RULE 9A, HENCE, THE ASSESSEE'S CASE WAS TO B E EXAMINED IN ACCORDANCE WITH THESE PROVISIONS. THEREAFTER, THE LD. CIT(A) E XAMINED THE AGREEMENT DATED 23-2-1999 ENTERED INTO BY THE ASSESSEE WITH M /S. ESSEL VISION WHEREBY TV SATELLITE BROADCAST RIGHTS AND PAY TV RIGHTS WER E GIVEN FOR ASIA REGION. HOWEVER, AS PER THE 2ND AGREEMENT DATED 21-4-1999, THE WORLD RIGHTS WERE GIVEN TO ESSEL VISION. THE LD. CIT(A) ALSO NOTED TH AT THIS FILM WAS APPROVED BY THE CENSOR BOARD FOR RELEASE ON 17-11-1998. THUS , AFTER TAKING INTO CONSIDERATION THESE FACTS, THE LD. CIT(A) HELD THAT THE ASSESSEE'S CASE FELL WITHIN THE SUB-CLAUSE (B) OF SUB-RULE (3) OF RULE 9 A. THE LD. CIT(A) ALSO REJECTED THE CONTENTION OF THE ASSESSEE REGARDING I MPACT ON REALIZATION AFTER THE FILM WAS SHOWN ON TV BECAUSE RULE 9A PROVIDED F OR DEDUCTION OF COST OF PRODUCTION IN A SPECIFIC MANNER IRRESPECTIVE OF ASS ESSEE'S DISCRETION REGARDING ITS EXHIBITION IN VARIOUS TERRITORIES AT VARIOUS POINTS OF TIME. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER IN NOT APPLYING THE PROVISIONS OF SUB-RULE (6) OF RULE 9A OF RULES FOR THE REASON THAT THE ASSESSEE COULD NOT DEMONSTRATE THE FACT THAT CONDIT IONS FOR INVOKING SAID SUB- RULE EXISTED. ACCORDINGLY, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THE TRIBUNAL AGREED WITH THE VIEW TAKEN BY LD CIT(A ) AND HELD THAT THE MODE OF EXHIBITION HAS NOT BEEN PRESCRIBED IN R ULE 9A AND HENCE EXHIBITION OF FILMS IN TV CHANNELS ALSO WOULD FALL UNDER RULE 9A. THE RELEVANT OBSERVATIONS MADE BY THE TRIBUNAL ARE EXTR ACTED BELOW:- 17. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E PARTIES, MATERIAL ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. IT I S NOTED THAT THE ASSESSEE HAS CLAIMED THAT THE FILM 'ASHIQUE' WAS PRODUCED FO R TELECAST EXCLUSIVELY ON TV. IT HAS ALSO BEEN CLAIMED THAT MODE AND TECHNOLO GY OF PRODUCING FILMS FOR TV IS DIFFERENT FROM FILM PRODUCED FOR THEATRIC AL EXHIBITION. HOWEVER, WE FIND THAT THE ASSESSEE HAS TAKEN A CERTIFICATE FROM CENTRAL BOARD OF FILM CERTIFICATION, WHICH IS VALID FOR THEATRICAL RELEAS E ONLY. HENCE, HOW A FILM PRODUCED FOR THEATRICAL RELEASE, HAVING A DIFFERENT MATERIAL/TECHNOLOGY, CAN BE CLAIMED TO HAVE BEEN PRODUCED EXCLUSIVELY FOR TV TELECAST AND IF IT IS NOT SO, THEN, WHY THE CERTIFICATE FROM THE CENSOR BOARD , WAS OBTAINED. THE ASSESSEE HAS ALSO CLAIMED THAT THE PREMIER OF THIS FILM TOOK PLACE ON THE TV. HOWEVER, AS COMMONLY KNOWN, WHEN THE FILM IS SHOWN, FOR THE FIRST TIME, ON THE TV, IT IS KNOWN AS PREMIER ON TV AND THIS FACT DOES NOT NECESSARILY MEAN THAT THE FILM WAS NOT RELEASED IN THE THEATRE OR WA S NOT MEANT FOR THEATRICAL RELEASE. HENCE, THIS CONTENTION OF THE ASSESSEE DOE S NOT RENDER ANY ASSISTANCE TO THE CAUSE OF THE ASSESSEE. THE ASSESSEE HAS CLAI MED THAT THIS FILM WAS PRODUCED FOR TV. HOWEVER, AS PER COMMERCIAL PRACTIC E, FILMS ARE PRODUCED IN SUCH A MANNER ONLY WHEN THE PRODUCER ENTERS INTO EXCLUSIVE ARRANGEMENT BEFORE HAND AND THE COST OF PRODUCTION AS WELL AS C ONSIDERATION FOR TELECAST ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 13 OF 14 RIGHTS IS ALSO SETTLED BEFORE HAND. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE HAS ENTERED INTO ASSIGNMENT AGREEMENT WITH ZEE TELE FILMS ON 23-4- 1999 I.E., MUCH AFTER THE DATE OF PRODUCTION AS WEL L AS APPROVAL BY THE CENSOR BOARD. HENCE, IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW CONTRARY, CLAIM OF THE ASSESSEE THAT THIS FILM WAS PRODUCED EXCLUSIVELY FOR TV IS ALSO REJECTED. FROM SCHEDULE-II ATTACHED TO THE ASSIGNMENT AGREEMENT BETWEEN THE ASSESSEE AND ZEE TELE FILM, IT IS NOTED THAT THE STAR CAST IS SAIF ALI KHAN AND TWINKLE KHANNA WHO AT THE RELEVANT POI NT OF TIME, WERE NOT ACTING IN THE TV SERIALS OR FILMS MADE FOR TV TELEC AST, HENCE, THIS FACT ALSO GOES AGAINST THE ASSESSEE'S CLAIMS. IT IS ALSO NOTE D THAT THE ASSESSEE HAS REDUCED COST OF PRODUCTION OF THIS FILM BY RS. 125 LAKHS, HOWEVER, FROM THE ZEE TELE FILMS, THE ASSESSEE HAS RECEIVED A CONSIDE RATION OF RS. 60 LAKHS ONLY AND NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THE SOURCE OF BALANCE RS. 65 LAKHS WHICH MAY HAVE BEEN REALIZED E ITHER FROM ANY OTHER DISTRIBUTORS OR TV TELECAST COMPANIES AND IN BOTH T HE SITUATIONS, THE ASSESSEE'S CLAIM THAT IT WAS PRODUCED EXCLUSIVELY F OR EXHIBITION ON TELEVISION STANDS CONTRADICTED. 18. HAVING STATED SO, NOW WE DEEM IT FIT TO CONSIDER T HE CLAIM OF THE ASSESSEE REGARDING APPLICATION OF RULE 9A OF THE INCOME-TAX RULES, 1962. THE ASSESSING OFFICER HAS HELD RULE 9A, WAS APPLICABLE BECAUSE OF THE FACT THAT FORM 52A HAD BEEN FILED BY THE ASSESSEE AND AT NO P OINT OF TIME THE ASSESSEE CLAIMED OR FURNISHED INFORMATION REGARDING THE FACT THAT THIS FILM WAS BEING PRODUCED ONLY FOR TV. THE ASSESSING OFFICER HAS ALS O HELD THAT IF IT WAS RELEASED ON TV, IT WAS ONE OF THE MODES OF EXHIBITI ON AND FOR THE REASON ALSO THAT RULE 9A WAS APPLICABLE. WE FIND THAT RULE 9A H AS BEEN SPECIFICALLY PROVIDED BY THE LEGISLATURE TO COMPUTE THE PROFITS AND GAINS OF BUSINESS OF PRODUCTION OF FEATURE FILMS. AS PER RULE 9A(2), THE FILM PRODUCER IS ENTITLED FOR DEDUCTION OF COST OF PRODUCTION OF THE FILM ON SELLING OF RIGHTS OF EXHIBITION OF THE FILM IN THE YEAR IN WHICH THE FILM IS CERTIF IED FOR RELEASE BY THE CENSOR BOARD AND IF THE FILM IS RELEASED IN SUCH YEAR ON C OMMERCIAL BASIS AT LEAST FOR 90 DAYS BEFORE THE END OF SUCH YEAR. IT IS ALSO PROVIDED THAT THE FILM PRODUCER MAY HIMSELF EXHIBIT THE FILM ON COMMERCIAL BASIS IN ALL OR SOME OF THE AREAS OR MAY SELL THE RIGHT OF EXHIBITION OF TH E FILM ON COMMERCIAL BASIS IN RESPECT OF SOME OF THE AREAS OR MAY EXHIBIT THE FILM ON COMMERCIAL BASIS IN CERTAIN AREAS AND MAY SELL THE RIGHT OF EXHIBITI ON OF THE FILM IN RESPECT OF ALL OR SOME OF THE REMAINING AREAS. THUS, THE REQUI REMENT IS EXHIBITION OF THE FILM ON COMMERCIAL BASIS - EITHER BY THE PRODUCER H IMSELF OR BY SELLING THE RIGHTS OF EXHIBITION TO ANOTHER PERSON. THE MODE OF EXHIBITION HAS NOT BEEN PRESCRIBED AND IT MAY BE SO BECAUSE OF THE FACT THA T WHEN THIS RULE WAS BROUGHT ON STATUTE, THE CONCEPT OF PRODUCTION OF FI LM FOR TV EXCLUSIVELY WAS NOT EVOLVED PARTICULARLY, IN VIEW OF THE FACT THAT TELEVISION HAD GOT NO SUCH WIDE REACH. EVEN OTHERWISE, EXHIBITION ON TV HAS AL SO BEEN EXPLOITED BY THE ASSESSEE ON A COMMERCIAL BASIS AS IT HAS BEEN DONE FOR MONETARY CONSIDERATION, HENCE, EXHIBITION OF FILMS ON TELEVI SION, IN SUCH CIRCUMSTANCES, IN OUR OPINION, CLEARLY FALLS WITHIN THE AMBIT OF R ULE 9A OF THE INCOME-TAX RULES, 1962. ITA NO.2928/BANG/2017 SHRI VIJAYKUMAR THIMMEGOWDA, BANGALORE PAGE 14 OF 14 IN THE ABOVE SAID CASE, THE DEPARTMENT TOOK THE VIE W THAT THE AMOUNT REALISED ON SALE OF TV RIGHTS OF THE FILM WOULD BE COVERED BY RULE 9A, WHICH IS EXACTLY THE CASE OF THE ASSESSEE BEFORE US . THE CONTENTION OF THE REVENUE WAS ACCEPTED BY THE TRIBUNAL. 14. IN VIEW OF THE FOREGOING DISCUSSIONS, WE HOL D THAT THE AMOUNT REALISED BY THE ASSESSEE ON SALE OF AUDIO RIGHTS AN D TV RIGHTS OF THE FILM WOULD FALL UNDER THE CATEGORY OF EXHIBITION O F FILMS ON A COMMERCIAL BASIS. ACCORDINGLY, WE DIRECT THE AO T O ALLOW DEDUCTION OF EXPENDITURE INCURRED ON PRODUCTION AGAINST THE A BOVE SAID RECEIPTS ALSO. THE ORDER PASSED BY LD CIT(A) IS ACCORDINGLY SET ASIDE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOV, 2020 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 2 ND NOV, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.