WP/20005/2008 of M/S USHAKIRAN MOVIES (HUF), Vs THE COMMERCIAL TAX OFFICER, on 4 February 2026

1. The said issue has been decided by the Assessing Authority under the head 'sale of machinery' under the heading 'x' in the assessment order. For ready reference, the said finding of the Assessing Officer in respect of the said issue is reproduced hereunder: On verification of fixed assets schedule of dealers/audited balance sheet it is found that there are sale of assets. The dealer has failed to exolain about rate of VAT charged and about fiyhients iemitted to the I i l : I I I I |' i I I t department and the commodity dealt, schedule of the commodity etc., or provided any d : documentary evidence. Hence in the absencl details it has treated as sales of machinery whic I specified in schedules and proposed to levy tax The dealer has stated that the amount shov show cause notice is not correcl and the actua is Rs 2,63,41 83,939.00 and it is not the machinery or any other goods and also stated I are herewith furnishing a certificate issued t Statutory Auditor explarning the transacti: informing that it does not form part of turn(,\ requested to consider the certificate and (il proposal. Further the auditor in their letter '15 ( certified that change in accounting pollcy necl deletion of the copy rights from fixed assets for r the entire balance amount as revenue expen(li the year 2005-06. The dealers failed to repll remaining amount as shown in Audit balance s 1 on vehicles Rs 85,68,979.00 and impoftt:r Rs.3.76,913.00 and others Rs.94,227.00. The co, of the assessee has been verified. But if at all re I of assets takes place it has to done for all asl,t particular asset removal or if addition tak( s then the Auditor (CA) shall mention a qualifi ) their report. As the dealer failed to submit I documentary evidence in support of their conterrl the deletions appearing in fixed assets schedul,) dealers treated as sales and tax levied as under.

- entry irils or of the t;re not r in the r mount ale of at they i' their r and :rr and :p the l).2008 sitated aiming ure for for the )et i.e., ca rs lention uation tsora place

1. ion in :,levant ons for of the Rs.90,40,1 19.00 @ 12.5o/o Rs.2,63,41,95,939.O0 @ 4o/"

8. The learned Senior Counsel appearing for he petitioner took the Bench to the provisions of Rule 9B ol tl t Income 'l'ax Rules and ernphasizcd on Rule 9B(2Xb) und:' rvhich the petitioner was seeking the benetlt. The said prov s ion i.e., Rule 9B(2Xb) is reploduced hereunder: 98(1) xxxxx x

(2) where a feature film is acquired by the film distributor in any previous year and in such previous year (a) xxxx (b) the film distributor_

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

(ii) sells the rights of exhibition of the film rn 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 area s and the film is released for exhibition on a commercial basis at least ninety days before the end of such previous year, the entrre cost of acquisition of the film shall be allowed as a deduction in computing the profits and gains of such previous year.

9. The leamed Senior Counsel submits that pursuant to the aloresaid Rules, the petitioner has got a total write off of the sale consideration that they have received. Further, it was also contcnded that the said sale of exhibiting right cannot be brought within the ambit ol the sale, as defined under thc Act. In the instant case, according to the learned Senior Counsel,.the four ingredients required for the completion of a valid sale under rhe Act is not available. According to the petitioner, there is no exchange ofgoods between the two pa*je The ownership ofthe films continues to remain with the petitioner himse and it is only the right to exhibit which has been provided agiLi :;r. which they get a sale consideration and lor which the provisio s of Rule 98 provides for writing otTof incorne generated under t te said sale of exhibiting rights. According to the leamed Senicr Counsel, the entire transaction is nothing but only re-writing oll' , t'the value of the goods. lt was also contended by the learned j:nior Counsel that the perusal of the findings ol the Assessing O I cer would go to shorv that the Assessing Officer is totalll' ;ilent on the contentions rvhich the petitioncl has raised in r:spect of the income generated by the petitioucr towards the salr of exhibiting rights and Rule 9B(2)(b) ou rvhich the petitioner ras advantage under the Incor-nc Tax, has not been deliberated or ,liscussed and have only in a rnechanical tnanner rejected the . ontention of the petitioner. l-he leamed Senior Counsel also r : len'ed to the objection that the duly engaged Chartered Accountitr L on behalfof the petitioner had submitted befbre the authoritie; wherein they have categorically hetd that the deletion sought firr '\'as'under the head 'copy rights' which does not represent any sal< or transfer of goods. lt was only adjustment from capital account to revenue account, which again has not been considered by the Assessing Olficer at all.

10. The leamed Special Government Pleader appearing for the State Tax, on the other hand, opposing the objection, submits that the petitioner's substantial income is from the sale of exhibiting rights and moreover the petitioner has not been able to produce cogent rnaterials belore the Assessing Officer to substantiate its contention. However, as regards the aspect of the Assessing Officer having not deliberated and discussed upon the provision of Rule 9 B(2)(b) which was banked upon by the peritioner and the adjudicating authority's order on this aspect not been happily worded for having dealt with the contentions of the petitioner. The learned counsel lbr the State was unable to justifo the order of the Assessing Ol-tlcer on this aspect referring to the findings that have not been given undcl the head 'sale of machinery' in the impugned order. I l. In view of the aforesaid facts and circumstances of the case, more particularly taking into consideration the findings that have been given by the Assessing Officer under the I,:ad 'sale o1' machinery' in the impugned order, we have nc I'resitation in leaching to the conclusion that the adjudicating au l lritl has not discussed on the contentions and objections ri ised by the petitioner insof'ar as the deletion that they have soi,,ht lor under the said head, neither does the impugned order ,,:al with the aspect of the benefit that the petitioner has avail: I under Rule 9B(2Xb) nor has he considered the aspect as to \!'r:ther the sale consideration on the right ol exhibiting the fllms u'o rld atnount to sale or transfel of goods under the Act. In the abs: rce of which, the finding so far as the sale of machinery in the irr :rugned order is concemed, is not sustainable and the irnpugned o' itr. therefore, deserves to be set aside so lar as the finding given :1 ainst the said head is concerned and the matter stands remittei back to the Adjudicating Authoritl, i.e., respondent to dccidc t -re said issue afresh after considering all the contentions beinrl put-fonh on either side.

12. Considcring the fact that the matter lx r .ains to the assessment year 2005-2006 and is a writ petition ptr iaining to the year 2008, whire remanding the matter back to the Assessing Authority, we also direct that let the Adjudicating Authority decide the matter afresh on the said ground within a period of three months from the date of receipt of a copy of this order. l3' The writ petition srands partly allowed. There shail be no order as to costs Consequently, misce[laneous petitions pending, if any, shall stand closed. SD/.B. REKHA RANI ASSISTANT REGIS //TRUE COPY// SECTION OFFICER Uo erabad To,

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HIGH COURT DATED:0410212026

ORDER

WP.No.20005 of 2008 a 1Jr )l)S hi D4-r t t oo ( z t PARTLY ALLOWING THE WRIT PETITIOhI WITHOUT COSTS er^q rt\a\rt