Law:

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Section 37(1) of the Income-tax Act, 1961, read with rule 9A of the Income-tax Rules, 1962 - Business expenditure - Allowability of - Assessment year 1992-93 - Whether if a film is not released for exhibition on a commercial basis for at least 180 days before end of a previous year, cost of production of film, insofar as it does not exceed amount realized by film producer by exhibiting film on a commercial basis, is to be allowed as a deduction in computing profits and gains of such previous year and balance, if any, is to be carried forward to next following previous year and allowed as a deduction in that year - Held, yes - Whether where assessee was a film producer and, admittedly, his film had not been exhibited for a period of 180 days in relevant previous year and had not recovered cost of its production, to compute income or loss of relevant assessment year as per rule 9A(3), Assessing Officer had to take into account number of days for which film was commercially exhibited and then allow deduction for cost of production of film to extent of collections made during period of exhibition only and balance cost of production was to be amortized, to be allowed as deduction in next year; provisions of section 80 would not be applicable in such a case - Held, yes FACTS The assessee was a film producer. In his income-tax return for the relevant assessment year 1993, he claimed the benefit of carry forward of certain sum as amortization expenses in respect of two films. The Assessing Officer allowed the claim. The Commissioner, in exercise of his jurisdiction under section 263, set aside the assessment and directed the Assessing Officer to withdraw the benefit of carry forward granted to the assessee on the ground that the provisions of section 80 were applicable and, therefore, the benefit of carry forward of the expenses was not admissible to the assessee as he had failed to file the income-tax return in accordance with section 139(3). The Assessing Officer implemented the directions issued by the Commissioner and withdrew the benefit of carry forward of amortization expenses granted to the assessee. On appeal, the Commissioner (Appeals) found that the…

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