CBDT Issues Directions on Verification of Expenses in Entertainment Sector Following C&AG Audit Findings [Read Direction]
CBDT issued directions, instructing tax officers to uniformly verify expenses in the entertainment sector following C&AG’s audit findings on inconsistencies in assessments.

CBDT - Verification of Expenses - Entertainment Sector Following C&AG Audit Findings - taxscan
CBDT - Verification of Expenses - Entertainment Sector Following C&AG Audit Findings - taxscan
The Central Board of Direct Taxes ( CBDT ) under the Ministry of Finance, Government of India, has issued a communication F.No.225/215/2018/ITA-II dated October 21, 2025, directing all Principal Chief Commissioners of Income Tax to ensure uniform verification of expenses claimed by taxpayers in the entertainment industry.
The instructions follow the findings of the Comptroller and Auditor General of India (C&AG) Performance Audit Report No. 1 of 2019 on the assessment of assessees in the entertainment sector.
The C&AG report had highlighted that Assessing Officers were adopting inconsistent methods while allowing or disallowing pre-operative and production-related expenses in the entertainment sector. Similar cases were being treated differently, leading to a lack of uniformity in tax assessments. Taking note of this observation, the CBDT has now instructed officers to examine expenses in the entertainment sector more systematically and in accordance with the Income Tax Act and Rules.
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The entertainment sector includes segments such as television, radio, film production, event management, music, broadcasting, sports, and animation. The CBDT has asked tax officers to review each case based on the nature of business and the type of expenditure incurred.
In particular, the circular instructs that pre-operative expenses should be examined with reference to the actual commencement of business. Such expenses may be allowed for amortisation only under Section 32D of the Income Tax Act, 1961, after verifying that the business has indeed begun.
For entities engaged in the production of feature films, officers have been asked to ensure that Form No. 52A is submitted within the prescribed time. This form must disclose details such as the start and completion dates of film production and all payments exceeding ₹50,000 made to any person involved in the production. Failure to file the form may attract a penalty under Section 272A of the Act.
The circular further directs officers to verify deductions for production and distribution expenses under Rule 9A and Rule 9B of the Income Tax Rules, 1962. These provisions govern the treatment of expenses incurred by film producers and distributors.
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