Deduction in respect of expenditure on acquisition of distribution rights of feature films

Deduction in respect of expenditure on acquisition of distribution rights of feature films.

273. (1) In computing the profits and gains of the business of production of feature films carried on by a person (herein referred to as the film distributor), the deduction in respect of the cost of acquisition of a feature film certified for release by the Board of Film Censors in a tax year shall be allowed in accordance with the provisions of sub-rules (2) to (4).

(2) Where a feature film is acquired by the film distributor in any tax year and in such tax year,—

(a) the film distributor sells all rights of exhibition of the film, the entire cost of acquisition of the film shall be allowed as a deduction in computing the profits and gains of such tax year; or

(b) the film distributor—

(i) himself exhibits the film on a commercial basis in all or some of the areas; or

(ii) sells the rights of exhibition of the film in respect of some of the areas; or

(iii) himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas, and the film is released for exhibition on a commercial basis at least ninety days before the end of such tax year, the entire cost of acquisition of the film shall be allowed as a deduction in computing the profits and gains of such tax year.

(3) Where a feature film is acquired by the film distributor in any tax year and in such tax year, the film distributor—

(a) himself exhibits the film on a commercial basis in all or some of the areas; or

(b) sells the rights of exhibition of the film in respect of some of the areas; or

(c) himself exhibits the film on a commercial basis in certain areas and sells the rights of exhibition of the film in respect of all or some of the remaining areas, and the film is not released for exhibition on a commercial basis at least ninety days before the end of such tax year, the cost of acquisition of the film, in so far as it does not exceed—

(i) the amount realised by the film distributor by exhibiting the film on a commercial basis; or

(ii) the amount for which the rights of exhibition are sold; or

(iii) the aggregate of the amounts realised by the film distributor by exhibiting the film and by the sale of the rights of exhibition, shall be allowed as a deduction in computing the profits and gains of such tax year and the balance, if any, shall be carried forward to the next following tax year and allowed as a deduction in that year.

(4) Where, during the tax year in which a feature film is acquired by the film distributor, and—

(a) he does not himself exhibit the film on a commercial basis; or

(b) does not sell the rights of exhibition of the film, no deduction shall be allowed in respect of the cost of acquisition of the film in computing the profit and gains of such tax year and entire cost of acquisition shall be carried forward to the next following tax year and allowed as a deduction in that year.

(5) Irrespective of anything contained in sub-rules (1) to (4), the deduction under this rule shall not be allowed unless,—

(a) in a case, where the film distributor—

(i) has himself exhibited the feature film on a commercial basis; or

(ii) has sold the rights of exhibition of the feature film; or

(iii) has himself exhibited the feature film on a commercial basis in some areas and has sold the rights of exhibition of the feature film in respect of all or some of the remaining areas, the amount realised by exhibiting the film, or the amount for which the rights of exhibition have been sold or, as the case may be, the aggregate of such amounts, is credited in the books of account maintained by him in respect of the year in which the deduction is admissible; and

(b) in a case, where the film distributor has transferred the rights of exhibition of the feature film on a minimum guarantee basis, the minimum amount guaranteed and the amount, if any, received or due in excess of the guaranteed amount or where the film distributor follows cash system of accounting, the amount received towards the minimum guarantee and the amount, if any, received in excess of the guaranteed amount, are credited in the books of account maintained by him in respect of the year in which the deduction is admissible.

(6) For the purposes of this rule,—

(a) the sale of the rights of exhibition of a feature film includes the lease of such rights or their transfer on a minimum guarantee basis;

(b) the rights of exhibition of a feature film shall be considered to have been sold only on the date when the positive prints of the film are delivered by the film distributor to the purchaser of such rights;

(c) distributor shall include a sub-distributor; and

(d) "cost of acquisition", in relation to a feature film, means the amount paid by the film distributor to the film producer or to another distributor under an agreement entered into by the film distributor with such film producer or such other distributor, as the case may be, for acquiring the rights of exhibition and, where the rights of exhibition have been acquired on a minimum guarantee basis, the minimum amount guaranteed, not being—

(i) the amount of expenditure incurred by the film distributor for the preparation of the positive prints of the film; and

(ii) the expenditure incurred by him in connection with the advertisement of the film.