COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM versus JOSEPH VALAKUZHY

Citation: [2008] 7 S.C.R. 752 · Decided: 06-05-2008 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Dismissed

Judgment (excerpt)

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[2008] 7 S.C.R. 752 
COMMISSIONER OF INCOME TAX, 
THIRUVANANTHAPURAM 
v. 
JOSEPH VALAKUZHY 
(Civil Appeal No. 7750 of 2002) 
MAY 6, 2008 
[ASHOK BHAN AND DALVEER BHANDARI, JJ.] 
Income Tax Rules -
r. 9A - Deduction in respect of 
expenditure incurred on production of feature film -Assessee 
doing the business of producing feature films - Film produced 
by assessee not exhibited for 180 days in the previous year, 
and, did not cover the cost of production of the film - Held: 
Assessee entitled to carry forward the balance of the cost of 
production to the next following previous year and claim 
deduction of the same in that year. 
Respondent-assessee is a film producer. A feature 
film produced by him was not exhibited for 180 days 
during the previous year and did not cover the cost of 
production of the film. 
The question which arose for consideration in the 
present appeal is whether the Respondent-assessee was 
entitled to carry forward the business expenditure 
incurred on production of the feature film over the next 
assessment year. 
Dismissing the appeal, the Court 
HELD:1.1. r.9A of the Income Tax Rules provides for 
deduction of expenditure incurred on production of 
feature films. r.9A would appropriately be applicable to the 
present case, as the respondent is doing the business of 
producing feature films. [Para 12] [759-H] 
1.2. The rule, as it now stands, provides that in such 
752 
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COMMNR. OF INCOME TAX, THIRUVANATHAPURAM v. 
753 
JOSEPH VALAKUZHY 
cases, deduction of the cost of production of the film is to fl 
be allowed to the extent of the amount realized during 
the number of days of commercial exhibition in that year 
and the balance has to be allowed in the next year. r.9A(2) 
provides that where a feature film is certified by the Board 
of Film Censors for release in any previous year, and in B 
that previous year the film is released for exhibition for at 
least 180 days, before the end of that previous year, the 
entire cost of production of the film shall be allowed as a 
deduction in computing the profits and gains of such 
previous year. r.9A(3) provides that where the film is not c 
released for exhibition for 180 days in the previous year, 
deduction of the cost of production is to be allowed to 
the extent of the amount realized during the period of 
commercial exhibition in that year and the balance shall 
be allowed in the next year. [Para 13) [760-B-D] 
D 
1.3. In the present case, the film had not been 
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-exhibited for foofe than·1ao days in the previous Yea·r: -·· 
While computing the income or loss for the relevant 
assessment year 1992-93, the assessing officer had to take 
into account the number of days on which the film was E 
commercially exhibited and then allow the deduction for 
cost of production of the film to the extent of the 
collections made during the period of exhibition only. The 
balance cost of production will be amortized under Rule 
9A(2) and then that will be allowed as deduction for the F 
nextyear. It is not a business loss. If a film is not released 
for exhibition on a commercial basis at least 180 days 
before the end of such previous year, the cost of 
production of the film insofar as it does not exceed the 
amount realized by the film producer by exhibiting the film G 
on a commercial basis, is to be allowed as a deduction in 
computing the profits and gains of such previous year 
and the balance, if any, is to be carried forward to the next 
following previous year and allowed as a deduction in that 
year. In the present case, the film in question was not H 
754 
SUPREME COURT REPORTS 
[2008] 7 S.C.R. 
A exhibited for a period of 180 days in the previous year, 
and, had not covered the cost of production of the film, 
the assessee was entitled to carry forward the balance of 
the cost of production to the next following previous year 
and claim deduction of the same in that year. (Para 14] 
B [760-E-H; 761-A] 
c 
D 
E 
F 
G 
H 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
7750 of 2002. 
From the final Judament and Order dated 27 .11.2001 of 
the High Court of Kerala at Ernakulamin I.TA. No. 105/1999 
Parag P. Tripathi, ASG, Arti Gupta, Vismai Rao, A.K. 
Shrivastava (for B.V. Balaram Das) for the Appellant. 
T.L.V. Iyer, Subramonium Prasad and Jay Kishore Singh 
for the Respondent. 
The Judgment of the Court was delivered by 
BHAN, J. 1. With the leave of the Court the Revenue has 
filed the present appeal, a

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