Law: Income Tax Act, 1922

Section: 23

[Indian Income-tax Act, 1922 (XI of 1922)]...........Section 23-Assessment-Single Talkie picture made in course of two accounting years-Computation of Profit or loss- Whether possible only after Completion and release of picture yes-Correct made of assessment--Part of loss allocated to earlier assessment year disallowed- Whether proper-Held no. The assessee-firm of two partners was constituted with a view to produce one talkie picture called "Poonam". The production of the picture commenced in June, 1951, and it was completed and released in November 1952. According to the Assessee: there was a total loss in the venture and as the firm was not registered, the assessee did not file any return. After a notice under Section 34 of the Indian Income Tax Act, 1922, was issued, the assessee filed returns for 1952-53 and 1953-54, showing finally loss of Rs. 42,338 and Rs. 1,07,594, respectively. The Income Tax Officer dropped action for 1952-53, and he made an order for 1953-:4, assessing the total income at Rs. 66,431 and took the view that the entire loss claimed by the assessee for 1953-54 could not be allowed, inasmuch as a part of the same related to the earlier year 1952-53 and therefore, could not be Considered in the assessment year 1953-54. On appeal, the Appellate Assistant Commissioner held that in the case of a talkie picture the result had to be considered as a whole and not piecemeal, that as the entire expenses had been incurred for producing a single picture, it would not be correct to draw a distinction between the expenses incurred in the two years and he, therefore, allowed a sum of Rs. 42,338 as a deduction. On a second appeal, the Appellate Tribunal agreed with the Appellate Assistant Commissioner. On a reference: Held, that in the very concept of production of a picture, whether the entire venture had resulted in profit or loss to the assessee can only be determined when the picture is completed and finally released. Till then, it will not be possible for anybody even to surmise whether there will be profit or loss in such a venture. Such artificial differentiation between the cost incurred in the two years as was made by the Income Tax Officer…

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