Business expenditure incurred during post production of film on account of advertisement expenses is allowable deduction if it satisfies the conditions of section 37

Business expenditure incurred during post production of film on account of advertisement expenses is allowable deduction if it satisfies the conditions of section 37

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Business expenditure incurred during post production of film on account of advertisement expenses is allowable deduction if it satisfies the conditions of section 37.

 

Business expenditure incurred during post production of film on account of advertisement expenses, once satisfies the conditions of section 37 cannot be disallowed u/r 9A – YES: HC

CIT Vs Dharma Productions Pvt Ltd

Whether business expenditure incurred during post production of film on account of advertisement expenses, once satisfies the conditions of section 37 cannot be disallowed u/r 9A – YES: HC
Whether Rule 9A is applicable to business expenditure incurred for positive print and advertisement after the grant of certification by the Censor Board – NO: HC
– Revenue’s appeals dismissed: BOMBAY HIGH COURT
Whether business expenditure incurred during post production of film on account of advertisement expenses, once satisfies the conditions of section 37 cannot be disallowed u/r 9A – YES: HC
++ in the present case, the cost of print and the cost of publicity and advertisement are under consideration. The issue is whether the expenditures for print and advertisement were liable to be disallowed in terms of Rule 9A. On perusal of rule 9A, it is clear that if a certain expenditure is claimed by the assessee by way of business expenditure, which does not form part of cost of production of a feature film, Rule 9A would have no applicability. In such a situation, the assessee’s claim of expenditure would be governed by the provisions of the Act. If the assessee satisfies the requirements of Section 37, there is no reason why such expenditure should not be allowed as business expenditure. To put it differently, the expenditure that would be governed by Rule 9A, would only be which is in respect of the production of the feature film;
Whether Rule 9A is applicable to business expenditure incurred for positive print and advertisement after the grant of certification by the Censor Board – NO: HC
++ cost or production defined for the purpose of rule 9A excludes the expenditure for positive print and cost of advertisement incurred after certification by the Board of Film Censors. What would therefore, be governed by the formula provided u/r 9A is the cost of production minus these costs. The legislature never intended that those costs which are in the nature of business expenditure but are not governed by Rule 9A, due to the definition of cost of production, are not to be granted as business expenditure. In other words, if the cost is cost of production of the feature film, it would be governed by Rule 9A. If it is not it would be governed by the provisions of the Act. The CIT(A) was, therefore, wholly wrong in holding that the expenditures in question were covered u/r 9A and therefore, not allowable. The Tribunal was correct in coming to the conclusion that such expenditure did not fall within the purview of Rule 9A and therefore, the assessee’s claim of deduction was governed by Section 37. Therefore, questions framed in the respective appeals are answered against the Revenue and both the appeals are dismissed.
Income Tax Appeal No. 873 of 2016

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