While holding that the investment for the purchase of distribution of a film is “intangible right,” the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has disallowed the claim of M/s Nadiadwala Entertainment to treat the expenses incurred on the film “aarakshan” as loss under the Income Tax Act, 1961.
The assessee, M/s Nadiadwala Entertainment & Technologies Ltdadvanced a sum of Rs.8.9 crores to “Prakash Jha Production” on account of feature film “Arakshan”. It was claimed by the assessee that t said the investment was made for purchase of distribution rights of the film. In the assessment completed, the Assessing Officer 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 appeal, the CIT(A) however characterized the loss as short term capital loss being loss on purchase of distribution rights.
The assessee and the department approached the Tribunal for relief.
A bench of Om Prakash Kant (Accountant Member) and Shri Sandeep Singh Karhail (Judicial Member) has held that “the assessee has not incurred expenses for production of the film whereas, the assessee claimed that the 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 opinion, finding of the Ld. CIT(A) on the issue reasoned and no interference is required in the same.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
