Case Law Details
ACIT Vs Nadiadwala Entertainment & Technologies Ltd. (ITAT Mumbai)
ITAT Mumbai held that investment made for purchase of distribution rights of the film is for the purchase of capital asset and hence loss incurred on the same allowable as ‘short term capital loss’.
Facts- The assessee advanced a sum of Rs. 8.9 crores to ‘Prakash Jha Production’ on account of a feature film ‘Arakshan’. It was claimed by the assessee that the said investment was made for purchase of distribution rights of the film but the assessee could not fulfil its obligation of financing the further amount for production of the film and dispute arose between the parties. The Prakash Jha Production acquired funds from some other parties and assessee was settled with a refund of Rs.3 crores. The balance amount was claimed by the assessee in return of income as operating expenses written off.
In the assessment completed, AO disallowed the loss on account of operating expenses of Rs.5.90 crores holding that same being in the nature of prior period expenses and hence not allowable in the year under consideration. On further appeal, the Ld. CIT(A) however characterized the loss as short term capital loss being loss on purchase of distribution rights. Aggrieved, the Revenue is in appeal for allowing claim as short term capital loss whereas the assessee is aggrieved for not treating the same as business loss.
Conclusion- We find that the assessee has not incurred expenses for production of the film whereas, the assessee claimed that said investment was made for purchase of distribution right of the film which are in the nature of intangible assets and therefore, investment was for purchase of capital asset and loss incurred on the same is in the nature on ‘short term capital loss ’. In our opinion, finding of the Ld. CIT(A) on the issue-in-dispute is well reasoned and no interference is required in the same. We accordingly uphold the finding of the Ld. CIT(A) on the issue-in-dispute.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
