Depreciation – Rate – Section 32 and R. 9B of I. T. Rules, 1962 – A. Y. 2010-11 – Broadcasting/ exhibition rights and satellite rights in feature films amount to distribution rights – Assessee entitled to 100% depreciation –

CIT vs. Smt. Achila Sabharwal; 371 ITR 219 (Del):

For the A. Y. 2010-11, the assessee claimed depreciation of Rs. 1.2 crore on cinematographic film at 100%. The Assessing Officer allowed only 25% depreciation observing that the assessee did not purchase any cinematographic films for consumption but what was purchased were broadcasting or exhibition rights and satellite rights. The Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The Assessing Officer took a very narrow view of the term “distribution rights” and held that exhibition rights, television rights and satellite rights cannot be treated as distribution rights. What was purchased and sold by the assessee were distribution rights.

ii) The right would include and consist of acquisition and transfer of rights to exhibit and broadcast and satellite rights. These rights are integral and form and represent rights of film distributor.

iii) Even otherwise, if Rule 9B of the Income-tax Rules 1962 would not be applicable, purchase and sale of film would result in a business transaction, i.e., sale consideration received less purchase price paid. Appeal is accordingly dismissed.”