ASHOK MENON,J. - (1.) The assessee is before us aggrieved by the finding of the Tribunal rejecting the appeal claiming the benefit under the provisions of Rule 9B(4) of the Income Tax Rules, 1962 (for brevity 'the Rules'). The following substantial questions of law arises for consideration: "1. Whether the Hon'ble Tribunal was right in law and on facts in upholding the order of the lower authorities, by finding that Rule 9B(4) would not entitle the appellant to claim deduction in respect of expenditure of acquisition of distribution rights of feature film during the previous year relevant to the assessment year 2005-06 ? 2. Ought not the Tribunal have found that as per the express provision of Rule 9B(4) of the Income Tax Rules, 1962, the deduction in respect of expenditure on acquisition of distribution rights of feature films, in cases where there was no exhibition of the film on a commercial basis or a sale of the rights for exhibition of the film, either during the previous year in which the feature film was acquired, or in the next following previous year, the deduction has to be granted to the assessee in the previous year next following the previous year during which the feature film was acquired by the film distributor ? 3. Whether the Hon'ble Tribunal was right in law and on facts in upholding the orders of the lower authorities, which held that the provisions of rule 9B(5) have an overriding effect over the provisions of Rule 9B(4), especially when the two provisions operated in separate fields and did contain any provision that was contrary to each other."
(2.) The assessment pertains to the year 2005-06 and the assessee filed returns declaring a total income of Rs. 19,90,63,060/- on 27-10-2005. Notice was issued on 05-04-2006 and the claim of the assessee for deduction of the amounts in connection with the acquisition of satellite distribution rights on three Malayalam films in the financial year 2003-04 was rejected vide assessment order at Annexure A. The First Appellate Authority also rejected the claim of the assessee vide order at Annexure B. Appeal preferred by the Revenue as well as the cross-objection filed by the assessee before the Income Tax Appellate Tribunal, Kochi Bench were dismissed vide order at Annexure C.
(3.) The contention of the assessee is that the lower authorities erred in holding that the appellant-Company was entitled to claim the deduction in respect of expenditure on acquisition of distribution of feature films obtained by the appellant in the year 2003-04 for the reason that there was no exhibition of the films on commercial basis during the period of acquisition or in the next year. The assessee claims that in accordance with the specific provisions in Rule 9B(4), deduction of the cost of acquisition made in the year 2003-04 (previous year to the assessment year 2004-05), has to be carried forward to the next following previous year (ie., 2004-05) and allowed as a deduction in that year, since the assessee has commercially exploited the film in the year of acquisition. It is pointed out that the reasoning of the lower authority that the non-obstante clause contained in Rule 9B(5) qualifies all the previous clauses of Rule 9B and hence the assessee was entitled to claim deduction during a previous year, when no amount was realised by exhibition of the film, is contrary to the express provisions in the Rules and hence legally sustainable. It is urged that the lower authority ought to have found that the impact of the non-obstante clause contained in Rule 9B(5) could only be in such situation and circumstances, as were expressly contemplated by the said clause. Rule 9B(5) deals exclusively with cases where there has been an exhibition of the feature film or sale of rights of exhibition of the feature film and in such cases, the said clause restricts the availment of deduction and mandates that the deduction shall be claimed only in the year of realisation of the amount pursuant to exhibition of the film and crediting of the said amount in the books of account maintained by the assessee. It is submitted that Rule 9B(5) does apply to a situation covered by Rule 9B(4), where there is no exhibition of the film on a commercial basis for more than two years in a row, including the year in which the distribution rights of the feature film was acquired by the assessee. The learned Standing Counsel for the Department submits that the non-obstante clause operates to avoid the effect of all contrary provisions.;