DEPUTY COMMISSIONER OF INCOME-TAX, ICHALKARANJI CIRCLE, ICHALKARANJI vs. GHODAWAT INDUSTRIES (I) PVT.LTD, KOLHAPUR

ITA 1908/PUN/2018Status: DisposedITAT Pune19 July 2022AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) was justified in allowing the expenditure on abandoned films as revenue expenditure, following CBDT Circular No. 16/2015 and the Bombay High Court decision. The Tribunal found no infirmity in the CIT(A)'s order.

What were the facts?

The assessee incurred expenditure on film production which was discontinued. The Assessing Officer disallowed this expenditure. The assessee claimed it as revenue expenditure in terms of CBDT Circular No. 16/2015.

What were the issues?

Whether expenditure on abandoned films can be treated as revenue expenditure in light of CBDT Circular No. 16/2015 and relevant judicial precedents.

Which sections of the Income-tax Act were involved?

Rule 9A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI INTURI RAMA RAO & SHRI S.S. VISWANETHRA RAVI

For Appellant: Shri Sharad Shah

For Respondent: Shri Arvind Desai

आदेश / ORDER

PER S.S. VISWANETHRA RAVI, JM :

This appeal by the Revenue against the order dated 11-09-2018 passed by the Commissioner of Income Tax (Appeals)-2, Kolhapur [‘CIT(A)’] for assessment year 2013-14.

The appellant-revenue raised three grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) justified in allowing expenses on abandoned films treating the same as revenue in nature in pursuance of CBDT Circular No. 16/2015.

3. Heard both the sides and perused the material available on record. We note that the assessee incurred Rs.3,71,60,050/- as expenditure on film production. According to AO, the assessee written off said amount being expenditure incurred on discontinued film and disallowed the same in the statement of total income. During the course of assessment proceedings, the assessee furnished revised computation of income and claimed the said expenditure which was incurred on discontinued films as eligible business expenditure and claimed the same as revenue incurred for the purpose of business in terms of CBDT Circular No. 16/2015 dated 06-10-2015. The AO denied the said claim. On perusal of the impugned order, the CIT(A) exercising appellate powers in view of the decision of Hon’ble High Court of Bombay in the case of Prithvi Brokers & Shareholders Pvt. Ltd. allowed the claim of assessee by holding the non- applicability of Rule 9A of the Rules to the facts of the case. The CIT(A) reproduced Circular No. 16/2015 in the impugned order and on perusal of the same, we note that the CBDT Circular clarified that Rule 9A does not apply to abandoned feature films and expenditure incurred on such abandoned feature films is to be treated as revenue expenditure but not as capital expenditure. Therefore, we find no infirmity in the order of CIT(A) and it is justified. Thus, the grounds raised by the Revenue are dismissed.

In the result, the appeal of Revenue is dismissed.

Order pronounced in the open court on 19th July, 2022.

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