Vijaykumar Thimmegowda v. ITO [ITA No.
2928/Bang/2017, dt. 2-11-2020] : 2020 TaxPub(DT) 4766 (Bang.-Trib.)
Movie making business -- Amount received from sale of TV
rights whether "receipt on exhibition of film on commercial basis"
under Rule 9 of Income Tax Rules
Facts:
Assessee was a movie producer and was in receipt of the
below monies by producing a movie --
|
Rs.
(in Crores)
|
Exhibition of film in certain
areas
|
5.40
|
Sale of Audio rights
|
0.15
|
Sale of TV rights
|
5.60
|
TOTAL
|
11.15
|
Expenditure was incurred for Rs. 14.94 crores in the making of the film and since the movie
was released on 13-1-2014 and ran below 90 days the unclaimed expenditure was
carried forward to next year under rule 9A(3)(c) for Rs. 3.79 crores.
The assessing officer held that the sale of audio rights
and TV rights cannot be construed as amount realized from "exhibition of
film on commercial basis" and was taxed as business income separately.
Commissioner (Appeals) sustained the addition. On higher appeal --
Held in favour of the assessee that the word
"area" used in the IT Rule 9 should be read taking into account
changes happening in the environment, thus even sale of TV rights/audio
rights/OTT rights are also different distribution areas in the current scheme
of things. The addition made by the assessing officer/Commissioner (Appeals)
was quashed.
Applied:
Vieshesh Films (P) Ltd. v. DCIT (2008) 26 SOT 64 (Mum) :
2009 TaxPub(DT) 0787 (Mum-Trib)
M/s. Laxmi Video Theatres and others v. State of Haryana
and others (1993) 3 SCC 715 (SC)
"Rule 9A. (1) In computing the profits and gains of
the business of production of feature films carried on by a person (the person
carrying on such business hereafter in this rule referred to as film producer),
the deduction in respect of the cost of production of a feature film certified
for release by the Board of Film Censors in a previous year shall be allowed in
accordance with the provisions of sub-rule (2) to sub-rule (4).
Explanation.--In this rule, --
(i) "Board of Film
Censors" means the Board of Film Censors 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 advertisement 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,
shall be reduced by the subsidy received by the film producer under any scheme
framed by the Government, where such amount of subsidy has not been included in
computing the total income of the assessee for any assessment year.]
(2) Where a [***] feature film is certified for release
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 deduction 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 respect 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 respect of all or some of the remaining areas, and the film is
released for exhibition on a commercial basis at least [ninety] days before the
end of such previous year, the entire cost 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 by the
Board of Film Censors in any previous year and in such previous year, the film
producer --
(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 respect 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 at 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 the 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 amounts realised by the film
producer by exhibiting the film and by the sale of the rights of exhibition,
shall be allowed as a deduction in computing the profits and gains of such
previous year; and the balance, if any, shall be carried forward to the next
following previous year and allowed as a deduction in that year."