Film Production Unit eligible for Income Tax Deduction: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Chennai has held that a film production unit is eligible for income tax deduction under section 80IB of the Income Tax Act, 1961.

The Assessing Officer observed that the assessee Mr. K.T Kunjumon was producing movies sine Nineteen Eighties and production of a new movie, though it could be construed as a new project was nothing but splitting up or reconstruction of a business already in existence

The first appellate authority granted relief to the assessee by relying on the judgment of Bombay High Court in the case of CIT vs. Jyoti Prakash Dutta and held that assessee had satisfied the conditions stipulated in Sub Section (2) of Section 80IA of the Act and was thus eligible for the deduction claimed by it.

The department approached the Tribunal contending that the assessee was using already existing machinery and therefore it could not be stated that there was any new industrial undertaking which came into existence during the relevant previous year.

Upholding the first appellate order, the Tribunal noted that the Bombay High Court had clearly held in the case of Jyoti Prakash Dutta (supra) that an assessee which was a film production unit, and which was not founded by transfer to a new business any machinery or plant previously used for any purpose, was entitled for deduction u/s.80IB of the Act.

“No doubt, the judgment was rendered by the Hon’ble Bombay High Court in the context of Section 80IA of the Act,” the Tribunal said.

“Conditions stipulated in Sub Section (2) of both the Sections are more or less pari materia. The block assessment period for which this appeal relates is 01.04.1986 to 30.01.1997, and the applicable law is Section 80IA of the Act as it stood before 01.04.2000. Therefore we cannot say that ld. CIT(A) fell in error in applying the judgment of Hon’ble Bombay High Court in the case of Jyoti Prakash Dutta (supra), which was in relation to section 80IB of the Act,” it said.

“Assessee was running a production house and each new project for a new film, in our opinion cannot be considered as split up or reconstruction of the business already in existence. It may be true that assessee had used machinery already available with it, alongwith hired machinery for the new film project. However, nothing has been brought on record by the Revenue to show that there was any transfer of used machinery or plant to a new business. That production of a cinema film would amount to manufacturing or processing of goods has been clearly spelt out by CBDT in Circular No.24 (F. No.6/22/68-IT (A-I), dated 23.07.1969. Now coming to the question whether assessee had employed more than ten persons, admittedly, list mentioned by the ld.AO at para 3 (i) of this order clearly indicate that there were more than ten persons working for the film project. Just because such persons, were not regular employees of the assessee, would not mean that they were not employed by the assessee for the purpose of new production project,” it added.