Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock - Assessee-firm had been consistently adopting a method of writing off cost of acquisition of rights of film distribution in year of acquisition irrespective of year of release and valuing closing stock as nil - However, assessee's aforesaid method of accounting did not confirm to method prescribed by circular issued by CBDT -For relevant assessment years, Tribunal clearly observed that assessee's profits could be ascertained properly from method followed by it - Whether section 145 would be applicable - Held, no - Whether assessee was bound to claim amortisation of cost of acquisition of rights of film distribution in accordance with circular of CBDT - Held, no Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of -Whether on basis of facts under head 'Method of accounting - Valuation of stock' full amount claimed by way of amortisation was allowable as deduction - Held, yes FACTS The assessee-firm had been consistently adopting a method of writing off the cost of acquisition of the rights of film distribution in the year of acquisition irrespective of the year of release and valuing the closing stock as nil. That method was adopted by the assessee right from the year 1965, when it started that business. For the assessment year 1970-71, the matter was carried up to the High Court which accepted the assessee's method of writing off the acquisition of the rights of film distribution for the assessment years 1971-72 and 1972-73, the Tribunal observed that the profits of the assessee during the relevant period could be ascertained properly from the aforesaid method and, therefore, the amounts claimed by way of amortisation were proper deductions. On reference, the revenue submitted that when the CBDT in one of its circulars had prescribed that amortisation in full might be permitted where the film was released in the first half of the accounting year and amortisation at half the rate would be permissible if the film was released in the latter half of the accounting year, the circular purported to grant a concession and the assessee could not claim…

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