Case Law Details

Case Name : Dharma Productions Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Appeal Number : IT Appeal No.-2483/2013
Date of Judgement/Order : 09/09/2015
Related Assessment Year : 2009-10
Courts : All ITAT (1730) ITAT Mumbai (489)

Brief of the case:

The ITAT Mumbai in the case of Dharma Productions Pvt. Ltd. held that the advertisement expenditure incurred after the censor board film certification would be a post-production expenditure not allowable under Rule 9A or 9B of the IT Rules, 1962. But the same are otherwise allowable under Sec 37 as business expenditure incurred exclusively for the business purposes (exhibition of film) more so because the same are not otherwise disallowed under any other provisions of the Act. 

Facts of the case:

  • The assessee is engaged in the business of Hindi film production and distribution of films. During the year under consideration, the assessee produced a film named ―Dostana‖ and sold the distribution rights to M/s Yashraj Films P Ltd. after getting certificate from Censor Board.
  • The assessee incurred advertisement expenditure of Rs.4,44,49,789/- and claimed the same as deduction. The AO noticed that the assessee has incurred the advertisement expenditure after the issue of certificate by the Censor Board. Accordingly , the AO disallowed the said expenditure taking view that the same not allowable in view of the provisions of Rule 9A and 9B of I.T Rules.
  • Such disallowance was also confirmed by CIT(A) , aggrieved assessee in appeal before ITAT.

Contention of the Assessee:

It was submitted that an identical issue has considered by the co-ordinate bench of Tribunal in the assessee’s own case in ITA No.2480 & 4791 in the favour of assessee wherein the tribunal ruled that the advertisement expenditure incurred post production can be claimed as deduction u/s 37 of the I.T Act,1961.

Contention of the Revenue:

The learned counsel for the revenue supported the order of CIT(A) and contended that advertisement expenditure is not part of the cost of production therefore, is not allowable as per Rule 9A.

Held by ITAT Mumbai:

  • The ITAT observed that the identical issue has been decided by the co-ordinate bench of this tribunal in the assessee’s own case in ITA No.2480 & 4791/Mum/2013 dated 18th September, 2013.In that case tribunal relied on the decision rendered by Hon’ble Madras High Court in the case of CIT Vs. Prasad Productions Pvt Ltd (179 ITR 147).
  • The AO and CIT(A) has disallowed the expense on the ground that the advertisement is a post-production activity and thus, cannot be allowed as per Rule 9A or 9B because only the expenses incurred in the course of production of films can be allowed under these rules.
  • Hon’ble Madras HC in the case of Prasad Productions Pvt. Ltd. held that there is no provision in the Act which provide for disallowance of advertisement expenses a business expenditure u/s 37.Hence , such expenditure being incurred exclusively for business purpose is allowable.

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Posted Under

Category : Income Tax (20862)
Type : Judiciary (8910)