DCIT 1(3), MUMBAI V. WARNER BROS,. PICTURES (I) P. LTD, MUMBAI

ITA 4866/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3683 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: W HASON
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI RAM LAL NEG I (JM) ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 THE ACIT 1(3), 564, 5 TH FLOOR, AAYAKAR BHAWAN, M.K.ROAD, MUMBAI- 400020. VS. M/S . WARNER BROS. PICTURES (I) PVT. LTD. EROS CINEMA BUILDING, 42, M.K.ROAD, CHURCHGATE, MUMBAI- 400020 PAN- AAACW5535B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. NITIN WAGHMODE RESPONDENT BY : SHRI. W. HASON DATE OF HEARING: 11/01/2016 DATE OF PRONOUNCEMENT: 15/01/2016 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT (APPEALS)-2, MUMBAI DT. 12/03/2014 FOR ASST. YEAR 2 009-10. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE, ENGAGED IN THE IMPORT, DUPLICATIO N, DISTRIBUTION OF FOREIGN CINEMATOGRAPHS AND VIDEO FILMS, ACTIVITIES FOR PURCHASE AND DISTRIBUTION OF INDIAN FILMS AND BUSINESS ACTIVITIE S OF TRADING IN CAPACITORS AND INVESTMENT IN SHARES AND SECURITIES, FILED ITS RETURN OF INCOME FOR ASST. YEAR 2009-10 ON 29/09/2009 DECLARI NG TOTAL LOSS OF RS. 32,55,43,367/-. THE RETURN WAS PROCESSED U/S 14 3(1) OF THE 2 ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND THE C ASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DT. 27/12/2011, DE TERMINING THE LOSS AT RS. 30,72,93,447/-, IN VIEW OF INTER ALIA , DISALLOWANCE OF RS. 1,82,49,920/-, ON ACCOUNT WRITE OFF OF EXPENSES ON ACCOUNT OF PURCHASE OF FILM SCRIPT, HOLDING THE SAME TO BE CAP ITAL EXPENDITURE. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASST . YEAR 2009-10 DT. 27/12/2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS)-2, MUMBAI. THE LD. CIT(A) ALLOWED THE ASS ESSEES APPEAL VIDE THE IMPUGNED ORDER DT. 12/03/2014, ON THE SOLE ISSUE OF WRITE OFF OF ADVANCE OF RS. 1,82,49,920/- FOR PURCHASE OF A F ILM SCRIPT, FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF MUKTA ARTS PVT. LTD IN ITA NO. 7955/BOM/1992 DT. 02 /05/2001 AND THE DECISION OF THE HONBLE MADRAS HIGH COURT IN TH E CASE OF B. NAGI REDDY (199 ITR 451)(MAD) HOLDING THAT THE EXPENDI TURE INCURRED BY THE ASSESSEE IN THIS REGARD WAS REVENUE EXPENDITURE AND ALSO IN VIEW OF RULE 9A OF IT RULES,1962. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-2, MUMBAI DT. 12/03/2014 FOR ASST. YEAR 2009-10 HAS PREFERRED THI S APPEAL RAISING THE FOLLOWING GROUNDS:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE EX PENDITURE OF RS. 1,82,49,920/- INCURRED BY THE ASSESSEE AS ADVANCE P AID FOR THE PURCHASE OF A FILM SCRIPT FOR THE PRODUCTION OF A FEATURE FILM WAS REVENUE EXPENDITURE? THE LD. DR FOR REVENUE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED (SUPRA) AND PLACED STRONG WHERE ON THE DECISION OF THE ASSESSING OFFICER (AO) ON THIS ISSUE. 3 ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 3.2 PER CONTRA, THE LD. AR FOR THE ASSESSEE SUPPOR TED THE ORDER OF THE LD. CIT(A) AND PRAYED FOR THE DECISION THEREIN TO B E UPHELD. BEFORE US, THE LD. AR SUBMITTED THAT THE ISSUE IN QUESTION, I. E. WHETHER THE EXPENDITURE INCURRED ON ADVANCE PAID /COST INCURRED FOR PURCHASE OF FILM SCRIPT OF AN ABANDONED FILM WRITTEN OFF IS ALL OWABLE AS A REVENUE EXPENDITURE, IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. VENUS RECORDS AND TAPES (P) LTD, IN ITA NO. 310 OF 2013 DT. 28/01/201 5 AND CBDT CIRCULAR NO. 16/2015 DT. 06/10/2015 ACCEPTING THE S AID DECISION. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTION AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUD ING THE JUDICIAL DECISIONS, ETC. CITED. THE ISSUE FOR CONSIDERATION AND ADJUDICATION BEFORE US IS WHETHER, IN THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS IN THIS REGARD , THE WRITE OFF OF EXPENDITURE OF RS. 1,89,49,920/- INCURRED ON ACCOUN T OF ADVANCE FOR PURCHASE OF A FILM SCRIPT FOR PRODUCTION OF AN ABA NDONED FILM WAS ALLOWABLE AS REVENUE EXPENDITURE. 3.3.2 WE FIND THAT A SIMILAR ISSUE WAS BEFORE THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF M/S VENUS RECORDS AND TAPE S PVT. LTD. IN ITA NO. 310/2013 DT. 28/01/2015, WHERE THE QUESTION FOR CONSIDERATION WAS WHETHER THE COST OF THE ABANDONED FILM WRITTEN OFF WAS REVENUE EXPENDITURE. THE HONBLE COURT DISMISS ED REVENUES APPEAL IN THAT CASE AND HELD IN FAVOUR OF THE ASSES SEE THAT THE COST OF THE ABANDONED FILM WRITTEN OFF WAS REVENUE EXPENDIT URE. IN COMING TO THIS FINDING, THE HONBLE COURT FOLLOWED ITS OWN DE CISIONS RENDERED IN CIT VS. RAJESH KHANNA (ITA NO. 3875/2010 DT. 14/09/ 2011) AND CIT VS. DREAM MERCHANT ENTERPRISES (ITA NO. 4343 & 4252 OF 2010 DT. 20/09/2011). 4 ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 3.3.3 THE LD. AR HAS ALSO PLACED BEFORE THE BENCH A COPY OF CBDT CIRCULAR NO. 16/2015 DY. 06/10/2015 ( F NO. 279/MIS C./140/2015- ITJ, WHEREIN, CONSEQUENT TO THE DECISION OF THE HO NBLE BOMBAY HIGH COURT IN VENUS RECORDS AND TAPES P. LTD.(SUPRA), IT HAS BEEN CLARIFIED THAT RULE 9A OF THE IT RULE, 1962 IS NOT APPLICABLE IN THE CASE OF ABANDONED FEATURE FILMS. THE SAME IS EXTRACTED HERE UNDER:- CIRCULAR NO. 16/2015 F.NO.279/MISC/140/2015-ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES ****** NEW DELHI, 6TH OCTOBER, 2015 SUBJECT: - NON-APPLICABILITY OF RULE 9A OF THE INCO ME TAX RULES 1962 IN THE CASE OF ABANDONED FEATURE FILMS- THE DEDUCTION IN RESPECT OF THE COST OF PRO DUCTION OF A FEATURE FILM CERTIFIED FOR RELEASE BY THE BOARD OF FILM CENSORS IN A PREVI OUS YEAR IS PROVIDED IN RULE 9A OF INCOME TAX RULES, 1962. 2. IN THE CASE OF ABANDONED FILMS, HOWEVER, SINC E CERTIFICATE OF BOARD OF FILM CENSORS IS NOT RECEIVED, IN SOME CASES NO DEDUCTION WAS ALLOWED BY APPLYING RULE 9A OF THE RULES OR BY TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE. 3. THE MATTER HAS BEEN EXAMINED IN LIGHT OF JUDIC IAL DECISIONS ON THIS SUBJECT. THE ORDER OF THE HON. BOMBAY HIGH COURT DATED 28. 1 .15 IN ITA 310 OF 2013 IN THE CASE OF VENUS RECORDS AND TAPES PVT. LTD. ON TH IS ISSUE HAS BEEN ACCEPTED AND THE AFORESAID DISPUTED ISSUE HAS NOT BEEN FURTH ER CONTESTED. 5 ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 CONSEQUENTLY, IT IS CLARIFIED THAT RULE 9A DOES NOT APPLY TO ABANDONED FEATURE FILMS AND THAT THE EXPENDITURE INCURRED ON SUCH ABA NDONED FEATURE FILMS IS NOT TO BE TREATED AS A CAPITAL EXPENDITURE. THE COST OF PRODUCTION OF AN ABANDONED FEATURE FILM, IS TO BE TREATED AS REVENUE EXPENDITU RE AND ALLOWED AS PER THE PROVISIONS OF SECTION 37 OF THE INCOME- TAX ACT. 4. BEING A SETTLED ISSUE, NO APPEALS MAY HENCEF ORTH BE FILED ON THIS GROUND BY THE OFFICERS OF THE DEPARTMENT AND APPEALS ALREA DY FILED, IF ANY, ALREADY FILED ON THIS ISSUE BEFORE VARIOUS COURTS/ TRIBUNAL S MAY BE WITHDRAWN/ NOT PRESSED UPON. THIS MAY BE BROUGHT TO THE NOTICE OF ALL OFFICERS CONCERNED. SD/- (D.S. CHAUDHRY) CIT (A&J), CBDT. NEW DELHI 3.3.4 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. VENUS RECORDS AND TAPES P . LTD, (SUPRA) AND IN VIEW OF CBDTS CIRCULAR NO. 16/2015 DT. 06/10/20 15(SUPRA), WE HOLD THAT THE WRITTEN OFF EXPENDITURE OF RS. 1,82,4 9,920/- INCURRED BY ASSESSEE AS ADVANCE PAID FOR PURCHASE OF A FILM SCR IPT FOR PRODUCTION OF AN ABANDONED FILM IS ALLOWABLE AS REVENUE EXPENDITU RE AND ALSO THAT RULE 9A OF THE IT RULES, 1962 HAS NO APPLICABILITY IN THE MATTER. CONSEQUENTLY, THE GROUNDS RAISED BY REVENUE ARE DIS MISSED. 4. IN THE RESULT, THE REVENUES APPEAL FOR ASST. Y EAR 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2016 6 ITA NO. 4866/MUM/2014 ASSESSMENT YEAR: 2009-10 SD/- SD/- ( RAM LAL NEGI ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 15/01/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. '#$ % , %' , / DR, ITAT, MUMBAI 6. $() * / GUARD FILE. + + + + / BY ORDER, + //TRUE COPY// , ,, ,/ // /+- . +- . +- . +- . (DY./ASSTT. 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