Steller Films (P.) Ltd. v. ACIT (2023) 198 ITD 682 (Mum) (Trib.)

S. 37(1) : Business expenditure-Business of cinema photographic films, Legal fees-Dispute of film-Allowable as deduction whether the film would release or not would be irrelevant-Abandoned project-Service charges paid to a marketing company related to a film-film which was subsequently abandoned and never released-Allowable as business loss-Interest expenditure-Project abandoned-Capital or revenue-Allowable as deduction[S. 28(i), 36(1)(iii ) Rule 9A]

Tribunal held that as long as expenses were incurred wholly and exclusively for purpose of business, whether film would release or not would be irrelevant, thus, said expenses is   to be allowed.  Tribunal held that since film was subsequently abandoned and never released, entire expenditure incurred on said project, including service charges were business loss and were to be allowed as such. Assessee claimed interest expenses with respect to borrowed funds. Assessing Officer held that said borrowed funds were used for film production and film was not released during year and as such expenses is were capital in nature. Tribunal held that  since said project was eventually an abandoned project and film was never released, very basis of disallowance ceased to hold good in law and interest expense being incurred wholly and exclusively for business purpose was to be allowed as deduction. (AY. 2013-14)