Case Law Details
Advertisement expenditure incurred after certification by Board of Film Censors cannot be included as part of cost of production, hence, provisions of rule 9A, will not apply. It was held, the expenditure incurred in regular course of business has to be allowed under section 37.
Brief facts are, on verifying the details submitted by the assessee, the Assessing Officer found that assessee has debited an amount of Rs. 2,62,77,421, on account of advertisement and publicity expenses for the movie “Billu Barber”. Referring to rule 9A of the Income Tax rules, 1962, the Assessing Officer observed that expenditure incurred in connection with advertisement of film after its certification by the Board of Film Censors is not allowable as expenditure. On verifying the details, he noticed that the Board of Film Censors has certified the film for release on 30th January 2009. He further noticed that out of the total advertisement expenditure of Rs. 2,62,77,421 an amount of ` 2,39,39,631, was incurred by the assessee after the certification of film by the Board of Film Censors on 30th January 2009. He, therefore, in terms of rule 9A, disallowing the expenditure claimed added back to the income of the assessee. Being aggrieved with such addition, the assessee challenged the same in appeal preferred before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) also confirmed the addition rejecting the claim of the assessee.
The learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, rule 9A is restricted to computation of expenditure of cost of production of feature film and has no application in respect of expenditure incurred with respect to business or distribution of film by the assessee in the normal course of his business.
Learned Authorised Representative submitted, even if the expenditure incurred towards cost of production may not be allowable under rule 9A, but certainly it has to be allowed under section 37. He submitted, though the expenditure incurred towards advertisement is part of cost of production but definitely it is for the purpose of business, hence, is allowable as business expenditure under section 37 of the Act. In support of such contention, learned Authorised Representative relied upon the following decisions:–
i) DCIT v/s Dharma Productions Pvt. Ltd. [2014] 62 SOT 177 (Mum. Trib.); and
ii) CIT v/s Prasad Productions Pvt. Ltd. [1989] 179 ITR 147 (Mad.)
Learned D.R. relied upon the observations of the learned Commissioner (Appeals) and the Assessing Officer.
We have considered the submissions of the parties and perused the material available on record. As is evident, the Assessing Officer has disallowed the expenditure incurred on advertisement by applying the provisions of rule 9A on the ground that the assessee has incurred such expenditure after certification of film by the Board of Film Censors. The learned Commissioner (Appeals) has also confirmed the disallowance by agreeing with the conclusion drawn by the Assessing Officer. However, it is not disputed by the Department that the assessee has incurred the expenditure towards advertisement of the movie in the normal course of business. That being the case, even though it cannot be considered as part of cost of production in terms of rule 9A, but at the same time, it cannot be denied that the expenditure incurred was in connection with the production of the movie, hence, is business expenditure. It is observed, identical dispute came up for consideration before the Tribunal, Mumbai Bench, in Dharma Productions Pvt. Ltd. v/s DCIT. The co–ordinate bench following the decision of the Hon’ble Madras High Court in CIT v/s Prasad Productions Pvt. Ltd., [1989] 179 ITR 147 (Mad.) and the decision of the Tribunal, Mumbai Bench, in Mukta Arts Pvt. Ltd. v/s ACIT, [2015] 105 ITD 533 (Mum.), held that the advertisement expenditure incurred after certification by Board of Film Censors cannot be included as part of cost of production, hence, provisions of rule 9A, will not apply. It was held, the expenditure incurred in regular course of business has to be allowed under section 37. The ratio laid down by the co–ordinate bench of the Tribunal is squarely applicable to the facts of the present case. Therefore, expenditure incurred by the assessee being wholly and exclusively laid down for the purpose of assessee’s business is allowable as deduction under section 37 of the Act. Accordingly, allowing assessee’s claim of deduction, we delete the addition made by the Assessing Officer. Ground no.4, is allowed.
