DCIT, New Delhi v. M/s. Jasmine Finvest Pvt. Ltd., New Delhi

ITA 876/DEL/2010 | 2007-2008
Pronouncement Date: 08-10-2013 | Result: Dismissed

Appeal Details

RSA Number 87620114 RSA 2010
Assessee PAN AAACJ2933Q
Bench Delhi
Appeal Number ITA 876/DEL/2010
Duration Of Justice 3 year(s) 7 month(s) 5 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Jasmine Finvest Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 08-10-2013
Date Of Final Hearing 08-10-2013
Next Hearing Date 08-10-2013
Assessment Year 2007-2008
Appeal Filed On 03-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D: NEW DELHI) BEFORE U.B.S. BEDI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.876/DEL/ 2010 (ASSESSMENT YEAR: 2007-2008) DCIT CIRCLE 4 (1) VS. M/S. JASMINE FINVEST PVT. LTD. NEW DELHI. 7 RAKABGANJ GURDWARA ROAD NEW DELHI. (PAN : AAACJ2933Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN CA RESPONDENT BY : SHRI VIV EK KUMAR DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-VII NEW DELHI DATED 18.01.2010. THE REVENUE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUNDS:- 01. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRO NEOUS & CONTRARY TO FACTS & LAW. 02. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 25 00 000/- MADE BY A.O. DISALLOWING THE EXPENSES CLAIMED FOR ACQUIRING DISTRIBUTION RIGHTS OF FILM KACHHI SADAK. 2.1. THE LD. CIT (A) IGNORED THE FACT THAT ASSESSEE HAS ONLY ENTERED INTO AN AGREEMENT WHICH WAS NOT EXECUTED DURING THE YEAR UNDER CONSIDERATION. 03 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADD ITION OF ITA NO.876/DEL/2010 2 RS.4 08 654/- MADE BY THE AO DISALLOWING THE EXPENS ES INCURRED FOR PURCHASING POSITIVE PRINTS. 3.1 THE LD. CIT (A) IGNORED THE FACT THAT AS PER TH E AGREEMENT THE PRINTS WERE TO BE SUPPLIED BY THE PRODUCER THEREFO RE SUCH EXPENSES ARE NOT ALLOWABLE IN THE HANDS OF THE DISTRIBUTOR. 04. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUNDS OF THE APPEAL RAISED ABOVE AT THE TIME OF H EARING. 2. GROUND NOS.1 & 4 ARE GENERAL IN NATURE AND DO NO T REQUIRE ADJUDICATION HENCE DISMISSED. 3. THE ASSESSEE IS A PRIVATE LIMITED COMPANY FOLLOW ING MERCANTILE METHOD OF ACCOUNTING. THE RETURN OF INCOME WAS FILE D DECLARING A LOSS OF RS.27 74 210/- ON 31.10.2007. DURING THE YEAR THE ASSESSEE HAS OBTAINED THE RIGHT FOR THEATRICAL DISTRIBUTION OF A FILM KA CCHI SADAK IN THE TERRITORY OF RAJASTHAN. THESE RIGHTS WERE OBTAINED BY A WRITTEN AGREEMENT DATED 06.09.2006 WITH M/S. JIA ENTERTAINMENT NETWOR K PVT. LTD. WHO WAS THE PRODUCER OF THE FILM. THE ASSESSEE HAS CLAIMED RS.25 LACS IN PROFIT & LOSS ACCOUNT ON ACCOUNT OF COST OF ACQUISITION OF D ISTRIBUTION RIGHTS OF FILM KACCHI SADAK. THE ASSESSING OFFICER DISALLOWED TH E AMOUNT. THE CIT (A) HAS GRANTED THE RELIEF BY HOLDING AS UNDER :- 4.1 I HAVE CAREFULLY CONSIDERED THE WRITTEN AND OR AL SUBMISSION(S) MADE ON BEHALF OF THE APPELLANT THE FINDINGS OF TH E ASSESSING OFFICER MADE IN THE ASSESSMENT ORDER AND THE FACTS ON RECOR D. THE ASSESSING OFFICER HAS MADE THE ABOVE ADDITION OF RS.25 00 000 /- ON THE GROUND THAT THE VERY FIRST CONDITION OF 'PAID' IS NOT SATI SFIED IN THE INSTANT CASE. FOR THE SAKE OF CONVENIENCE AND CLARITY RULES 9B(1 ) AND 9B(2) ARE PRODUCED HEREINBELOW: 'DEDUCTION IN RESPECT OF EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS OF FEATURE FILMS. ITA NO.876/DEL/2010 3 9B.(L) IN COMPUTING THE PROFITS AND GAINS OF THE B USINESS OF DISTRIBUTION OF FEATURE FILMS CARRIED ON BY A PERSO N (THE PERSON CARRYING ON SUCH BUSINESS HEREAFTER IN THIS RULE REFERRED TO AS FILM DISTRIBUTOR) THE DEDUCTION IN RESPECT OF THE COST OF ACQUISITION OF A FEATURE FILM SHALL BE ALLOWED IN ACCORDANCE WITH SUB-RULE (2) TO SUB-RULE (4). EXPLANATION.-FOR THE PURPOSES OF THIS RULE 'COST O F ACQUISITION ' IN RELATION TO A FEATURE FILM MEANS THE AMOUNT PAI D BY THE .FILM DISTRIBUTOR TO THE FILM PRODUCER AS DEFINED IN RULE 9A UNDER AN AGREEMENT ENTERED INTO BY HIM WITH SUCH FILM PRODUC ER FOR ACQUIRING THE RIGHTS OF EXHIBITION AND WHERE THE R IGHTS OF EXHIBITION HAVE BEEN ACQUIRED ON A MINIMUM GUARANTE E BASIS THE MINIMUM AMOUNT GUARANTEED NOT BEING - (I) THE AMOUNT OF EXPENDITURE INCURRED BY THE FILM DISTRIBUTOR FOR THE PREPARATION OF THE POSITIVE PRI NTS OF THE FILM; AND (II) THE EXPENDITURE INCURRED BY HIM IN CONNECTION WITH THE ADVERTISEMENT OF THE FILM. (2) WHERE A FEATURE FILM IS ACQUIRED BY THE FILM D ISTRIBUTOR IN ANY PREVIOUS YEAR AND IN SUCH PREVIOUS YEAR- (A) THE FILM DISTRIBUTOR SELLS ALL RIGHTS OF EXHIBI TION OF THE FILM THE ENTIRE COST OF ACQUISITION OF THE FILM SH ALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR; OR (B) THE FILM DISTRIBUTOR - (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 RESPECT OF SOME OF THE AREAS; OR (III) HIMSELF EXHIBITS THE FILM ON A COMMERCIAL BAS IS 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 RELEASED FOR EXHIBITION ON A COMMER CIAL BASIS AT LEAST NINETY DAYS BEFORE THE END OF SUCH PREVIOUS Y EAR THE ENTIRE COST OF ACQUISITION OF THE FILM SHALL BE ALL OWED AS A DEDUCTION IN COMPUTING THE PROFITS AND GAINS OF SUC H PREVIOUS YEAR. ' 4.2 RULE 9B HAS BEEN FRAMED UNDER SECTION 295 OF TH E INCOME-TAX ACT BY CENTRAL BOARD OF DIRECT TAXES (CBDT). RULE 9 B DEALS WITH ITA NO.876/DEL/2010 4 DEDUCTION IN RESPECT OF EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS. UNDER RULE 9B(1) IT IS INTER ALIA LAID D OWN THAT IN COMPUTING PROFITS AND GAINS OF BUSINESS OF DISTRIBUTION THE FILM DISTRIBUTOR IS ENTITLED TO DEDUCTION IN RESPECT OF EXPENDITURE INC URRED BY HIM FOR ACQUIRING DISTRIBUTION RIGHTS. THERE IS AN EXPLANAT ION TO RULE 9B(1). IT DEFINES 'COST OF ACQUISITIONS' TO MEAN THE AMOUNT P AID BY THE FILM DISTRIBUTOR TO THE FILM PRODUCER [OR ACQUIRING THE RIGHTS OF EXHIBITION AND WHERE RIGHTS OF EXHIBITION HAVE BEEN ACQUIRED O N MINIMUM GUARANTEE BASIS THEN THE MINIMUM AMOUNT GUARANTEED SHALL CONSTITUTE COST OF ACQUISITION. IN THIS CASE THE RIGHT OF EXH IBITION HAS BEEN ACQUIRED ON MINIMUM GUARANTEE BASIS. IN THIS CASE THE MINIMUM AMOUNT GUARANTEED IS THEREFORE THE COST OF ACQUISI TION WHICH IS RS.25 LAKHS AND ON PAYMENT OF RS.25 LAKHS THE ASSESSEE A CQUIRED THE RIGHT OF EXHIBITION. UNDER RULE 9B(2) IT IS INTER ALIA PR OVIDED THAT WHERE A FILM WAS ACQUIRED BY THE DISTRIBUTOR IN ANY PREVIOU S YEAR AND IN SUCH PREVIOUS YEAR IF THE FILM DISTRIBUTOR EXHIBITS THE FILM AND THE FILM IS RELEASED AT LEAST 90 DAYS BEFORE THE END OF THE PRE VIOUS YEAR THEN THE ENTIRE COST OF ACQUISITION SHALL BE ALLOWED AS DEDU CTION IN COMPUTING THE PROFITS AND GAINS OF SUCH PREVIOUS YEAR. IN THE PRESENT CASE THE FILM WAS RELEASED ON 08-09-2006 I.E. AFTER THE AGRE EMENT DATED 06.9.2006. THEREFORE RULE 9B(2)(B) APPLIES TO THE FACTS OF THIS CASE. 4.3 ACCORDING TO THE ASSESSING OFFICER THOUGH RULE 9B(2) IS APPLICABLE TO THE FACTS OF THE PRESENT CASE BUT EXP LANATION TO SUB-RULE (1) OF RULE 9B DEFINES THE COST OF ACQUISITION AS T HE AMOUNT PAID BY THE FILM DISTRIBUTOR TO THE FILM PRODUCER. THEREFORE H E HELD THAT ONLY THE AMOUNT PAID CAN BE CONSIDERED AS COST OF ACQUISITIO N AND SINCE THE AMOUNT OF RS.25 LAKHS WAS NOT PAID DURING THE YEAR UNDER CONSIDERATION THE SAID AMOUNT OF RS.25 LAKHS WAS D ISALLOWED. THEREFORE THE ISSUE TO BE DECIDED IN THE PRESENT A PPEAL RELATES TO THE MEANING OF THE EXPRESSION 'PAID' AS APPEARING IN EX PLANATION TO SUB- RULE (1) OF RULE 9B OF THE INCOME TAX RULES 1962. SECTION 43(2) DEFINES THE EXPRESSION PAID IN THE FOLLOWING MANN ER:- 'PAID' MEANS ACTUALLY PAID OR INCURRED ACCORDING TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH THE PROFITS OR G AINS ARE COMPUTED UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PRO FESSION'. HENCE THE EXPRESSION 'PAID' AS APPEARING AN EXPLAN ATION TO SUB-RULE (L) OF RULE 9B OF THE INCOME TAX RULES 1962 SHOULD TAKE ITS COLOUR AND MEANING FROM THE DEFINITION OF THE SAID EXPRESS ION AS FOUND IN SECTION 43(2) OF THE ACT. ADMITTEDLY THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING ON WHICH THERE IS N O DISPUTE. THE LIABILITY TO PAY THE IMPUGNED AMOUNT OF RS.25 LAKHS AROSE UNDER AN AGREEMENT DATED 06.9.2006. IN OTHER WORDS THE LIAB ILITY FOR A SUM OF RS.25 LAKHS AROSE UNDER THE CONTRACT BETWEEN THE FI LM PRODUCER NAMELY JIA ENTERTAINMENT NETWORK PVT. LTD. AND THE FILM DISTRIBUTOR I.E. THE APPELLANT UPON THE EXECUTION OF THE SAID A GREEMENT. THE NON- PAYMENT OF THE ABOVE SUM OF RS.25 LAKHS DURING THE YEAR UNDER CONSIDERATION DOES NOT LEAD TO THE INFERENCE THAT T HE LIABILITY FOR THE ITA NO.876/DEL/2010 5 AGREED CONSIDERATION OF RS.25 LAKHS DID NOT CRYSTAL LIZE ON THE DATE OF THE AGREEMENT. THUS IT IS FAIR TO CONCLUDE THAT TH E LIABILITY FOR THE EXPENSES HAS BEEN ACTUALLY INCURRED DURING THE YEAR CONSIDERATION. IN THIS CONTEXT RELIANCE IS PLACED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF PEREIRA & ROCHE V. CIT [1966] 61 ITR 371 WHEREIN IT WAS HELD THAT THE EXPRESSION 'ACTUALLY P AID' OR 'PAID' IS NOT TO BE UNDERSTOOD IN A PHYSICAL SENSE BUT IN THE SE NSE THAT THE EXPENDITURE IS ACTUALLY 'INCURRED'. RELIANCE IS ALS O PLACED ON THE DECISION IN THE CASE OF GEEVA FILMS V. ITO (1995) 5 2 ITD135(COCHIN). FOR THESE REASONS I AM OF THE CONS IDERED VIEW THAT UNDER RULE 9B(I) READ WITH EXPLANATION THERETO THE APPELLANT IS ENTITLED TO THE DEDUCTION OF FULL COST OF ACQUISITI ON INCURRED BY IT UNDER THE AGREEMENT. UNDER THE CIRCUMSTANCES STATED ABOVE THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.25 00 000/-.AS A RESULT GROUND NO.2 IS ALLOWED. 4. WHILE PLEADING ON BEHALF OF THE REVENUE LD. DR R ELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND LD. AR RELIED ON THE ORDER OF THE CIT (A). 5. AFTER HEARING BOTH THE SIDES WE HOLD THAT RULE 9 B OF THE INCOME- TAX RULES 1962 DEALS WITH THE DEDUCTION IN RESPECT OF THE EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS. AS PER THIS RUL E FOR COMPUTATION OF PROFITS AND GAINS OF DISTRIBUTION OF FILM THE DEDU CTION IN RESPECT OF EXPENDITURE INCURRED FOR ACQUIRING DISTRIBUTION RIG HTS IS ALLOWABLE EXPENDITURE. IN THE ASSESSEES CASE THE RIGHT OF E XHIBITION HAS BEEN ACQUIRED FOR MINIMUM WARRANTY BASIS AND THE COST OF ACQUISITION AS DEFINED IN THE RULE MEANS THAT THE AMOUNT PAID BY T HE FILM DISTRIBUTOR TO THE FILM PRODUCER FOR ACQUIRING THE RIGHTS OF EXHIB ITION AND WHERE THE RIGHTS OF EXHIBITION HAVE BEEN ACQUIRED ON A MINIMU M GUARANTEE BASIS THEN THE MINIMUM AMOUNT GUARANTEED SHALL CONSTITU TE COST OF ITA NO.876/DEL/2010 6 ACQUISITION. FURTHER AS PROVIDED IN THE RULE IF T HE FILM IS RELEASED ON A COMMERCIAL BASIS AT LEAST FOR 90 DAYS AT THE END OF THE PREVIOUS YEAR THE ENTIRE COST OF EXHIBITION OF THE FILM IS ALLOWABLE AS A DEDUCTION IN COMPUTING THE PROFIT AND GAINS OF THAT PREVIOUS YEA R. THE ASSESSEE WAS TO PAY MINIMUM GUARANTEE OF RS.25 LACS AS PER THE AGRE EMENT DATED 06.09.2006 AND AS HELD IN THE VARIOUS DECISIONS MEN TIONED IN THE CIT (A)S ORDER THE EXPRESSION ACTUALLY PAID OR PAI D IS NOT TO BE UNDERSTOOD IN A PHYSICAL SENSE BUT IN THE SENSE THA T THE EXPENDITURE IS ACTUALLY INCURRED. SIMILARLY THE DECISION IN THE C ASE OF GEEVA FILMS VS. ITO 52 ITD 135 (COCHIN) SUPPORTS THE CASE OF THE ASSESSEE. IN VIEW OF THESE FACTS WE UPHOLD THE ORDER OF CIT (A) FOR DEL ETING THE ADDITION OF RS.25 LACS MADE BY THE ASSESSING OFFICER. ACCORDING LY GROUND NOS.2 & 2.1 ARE DISMISSED. 6. IN THE GROUND NOS.3 & 3.1 THE ISSUE RAISED IS D ELETING THE ADDITION OF RS.;4 08 654/- MADE BY THE ASSESSING OFFICER DIS ALLOWING THE EXPENSES INCURRED FOR PURCHASING POSITIVE PRINTS. 7. LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFI CER. LD. AR RELIED ON THE ORDER OF THE CIT (A). 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE C IT (A) HAS GRANTED THE RELIED BY HOLDING AS UNDER :- 5.2 I HAVE CAREFULLY CONSIDERED THE WRITTEN AND OR AL SUBMISSION(S) MADE ON BEHALF OF THE APPELLANT THE FINDINGS OF TH E ASSESSING OFFICER MADE IN THE ASSESSMENT ORDER AND THE FACTS ON RECOR D. I AGREE WITH THE ITA NO.876/DEL/2010 7 CONTENTION RAISED ON BEHALF OF THE APPELLANT THAT R ULE 9B DEALS ONLY WITH THE DEDUCTION IN RESPECT OF EXPENDITURE ON ACQ UISITION OF DISTRIBUTION RIGHTS AND IT DOES NOT DEAL WITH THE D EDUCTION IN RESPECT OF EXPENDITURE RELATING TO COST OF POSITIVE PRINTS AND PUBLICITY EXPENSES. RULE 9B DOES NOT PUT ANY RESTRICTION ON THE DEDUCTI ON IN RESPECT OF SUCH EXPENSES RELATING TO COST OF POSITIVE PRINTS A ND PUBLICITY EXPENSES RATHER IT EXCLUDES THE AMOUNT OF EXPENDIT URE INCURRED BY THE FILM DISTRIBUTOR FOR THE PREPARATION OF THE POSITIV E PRINTS OF THE FILM AND THE EXPENDITURE INCURRED BY HIM IN CONNECTION WITH THE ADVERTISEMENT OF THE FILM IN ACCORDANCE WITH EXPLANATION TO SUB-R ULE (1) OF RULE 9B. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER TH AT THE SAID EXPENDITURE HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSES OF BUSINESS. I ALSO DO NOT FIND ANY OTHER ADEQUATE OR RELEVANT MATERIAL ON THE BASIS OF WHICH THE EXPENSES INCURRED BY THE ASS ESSEE COULD BE DISALLOWED. THEREFORE I AM OF THE CONSIDERED VIEW THAT THE EXPENDITURE INCURRED ON THE PURCHASE OF POSITIVE PR INTS IS AN ALLOWABLE EXPENDITURE IN TERMS OF SECTION 37(1) OF THE ACT. S UBJECT TO THE OBSERVATIONS MADE ABOVE THE ASSESSING OFFICER IS D IRECTED TO DELETE THE ADDITION OF RSA 08 654/- ON ACCOUNT OF EXPENSES ON PURCHASE OF POSITIVE PRINTS. AS A RESULT GROUND NO.3 IS ALLOWE D. AFTER HEARING BOTH THE SIDES WE HOLD THAT RULE 9B DEALS ONLY WITH THE DEDUCTION IN RESPECT OF THE EXPENDITURE ON ACQUISIT ION OF DISTRIBUTION RIGHTS. HOWEVER IT DOES NOT PUT ANY RESTRICTION ON THE DEDUCTION IN RESPECT OF ANY EXPENSES RELATING TO THE COST OF POSITIVE PR INTS AND PUBLICITY EXPENSES. SINCE THIS EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE THEREF ORE WE SUSTAIN THE ORDER OF THE CIT (A) FOR DELETING THE ADDITION. 9. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 8 TH DAY OF OCTOBER 2013 AFTER THE CONCLUSION OF THE HEARING. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 8 TH DAY OF OCTOBER 2013/TS ITA NO.876/DEL/2010 8 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-VII NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT NEW DELHI