SEN, J. - (1.) THE following two questions of law have been referred to this Court by the Tribunal under S. 256 (1) of the IT Act, 1961 ('the Act') :- "1. Whether, on the facts and in the circumstances of the case and having regard to the fact that the decision of the Tribunal dt. 12th Aug, 1976 referred to in question No. 1 above was given after considering all the circulars issued by the CBDT regarding the amortisation of the cost of feature films since 1937, the Tribunal was justified in holding that there was apparent mistake in the order of the Tribunal dt. 12th Aug, 1976,? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Circular No. 30 dt. 4th Oct, 1969, issued by the CBDT should be applied in deciding the correct rate of amortisation of the cost of acquiring the distribution rights of the films in the case of the assessee," The reference relates to the asst. yr. 1970-71, for which the relevant period of account is the year ending on 31st March, 1970.
(2.) IT has been contended on behalf of the Department that the Tribunal has rectified its earlier order and that the rectification order was not made according to law. Next, it was argued that two view were possible to be taken with regard to scope and effect of the various circulars and also the applicability thereof. It was further argued that the Tribunal should not have entertained the miscellaneous application for rectification of its earlier order. Mr. Dhar, appearing on behalf of the assessee, has invited our attention to the four circulars that were supposed to have been placed before the Tribunal at the time of hearing of the case regarding amortisation of the cost of production of a film. The first circular is dt. 4th Jan,1951. In that cl. 1 of the said circular refers to the representation made by the film industry. Clause 2 lays down how the expenses should be allowed and cl. 3 lays down that circular will apply also in the case of the distribution in the same way as the cost of production to be treated in the hands of the film producer and the methods of allowance and the manner of other application will be as indicated in paragraph 2 of the circular. This was followed by another circular dt. 4th Oct., 1969. By this circular, the Board referred to the earlier circular dt. 4th Jan., 1951, and modified paragraph 2of the circular dt. 4th Jan., 1951. In other words, the Board Changed the method of computation of the allowance and also the rate applicable to various film producers in the year mentioned in the circular. The effect of the next circular was only to modify paragraph 2 of the circular dt. 4th Jan.,1951. The circular dt. 4th Oct., 1969, did not strike out the earlier circular at all but only brought about some changes in paragraph 2 of the earlier circular changing the rates of allowance and the manner of their application. The thirds Circular No. 92, dt.18th Sept., 1972. This circular also, once again, lays down the manner in which the allowance, that has to be given, has to be worked out. The circular dt. 4th Oct 1969, specifically refers to Circular dt. 9th April, 1959. Therefore, the effect of these circulars was that certain allowance were to be given. In other words, the Board decided to give certain allowances to the film industries and those allowances were enumerated in paragraph 2. The contents of paragraph 2 were changed from time to time but the contents of paragraph 3 of the Circular dt. 4th Jan., 1951 by which the Board had directed that the cost of acquiring distribution right should be treated in the hands of the distributors in the same way as in the hands of the producer, were not changed by any subsequent circulars.
(3.) LASTLY , came the Circular No. 92, dt. 18th Sept., 1972, and Circular dt. 5th Dec., 1974. The assessment year involved in this case being the asst. yr. 1970-71 and 1971-72, these circulars on the face of it, should not have been applied to these year. The law must be the law as was in force on the first day of the assessment year.;