Law:

Section:

Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-tax Act, 1922] - Method of accounting - Valuation of Stock - Assessment year 1950-51 - Assessee-company had been carrying on business as producers, distributors and exhibitory of motion pictures - Company released a picture for public exhibition on 21-10-1949 - Accounting year of assessee-company ended on 31-12-1949 - Assessee, in accordance with instructions of year 1937 issued by Central Board of Revenue, claimed amortisation allowance of 60 per cent for year 1949, not with standing that intervel between release of film and end of year was just over two months - ITO disallowed said rate of amortisation holding that picture had run only for 72 days in year of account and so assessee could be allowed to write off 72/365 of 60 per cent of cost of production or roughly 12 per cent of cost of production - Thus, at close of year picture was valued at 88 per cent instead of 40 per cent adopted by assessee - AAC as well as Tribunal upheld ITO's order - Whether as per instruction issued by Central Board of Revenue in year 1937, year for purpose should be, not any period long or short ending with accounting year of assessee but rather as a period of 365 days - Held, yes - Whether since assessee did not proceed on this basis but on artificial computation of year, it would not disclose true profits or gains of assessee for year of account - Held, yes - Whether, therefore, rejection of method of accounting employed by assessee by revenue authorities was justified - Held, yes Circular and Notifications : D.O.R. Dis. No., 178-I.T./37 dated 13-5-1937 issued by Central Board of Revenue. FACTS The assessee-company had been carrying on business as producers, distributors and exhibitors of motion pictures. The company released a picture for public exhibition on 21-10-1949, from which date up to the end of the account year (December 31,1949), they yielded a total collection of Rs. 9,50,189. The cost of production was debited to the trading account and similarly the collections were credited to the same account. At the end of the account year the assessee valued the films at 40 per cent of…

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