272. Deduction in respect of expenditure on production of feature films.—

(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 producer), the deduction in respect of the cost of production 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 certified for release by the Board of Film Censors in any tax year and in such tax year,—

(a) the film producer sells all rights of exhibition of the film, the entire cost of production of the film shall be

allowed as a deduction in computing the profits and gains of such tax year; or

(b) the film producer—

(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 production 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 certified for release by the Board of Film Censors in any tax year and in such tax year, the film producer—

(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 production of the film in so far as it does not exceed—

(i) the amount realised by the film producer 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 producer 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 certified for release by the Board of Film Censors, and the film producer––

(a) 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 production of the film in computing the profit and gains of such tax year and entire cost of production shall be carried forward to the next following tax year and allowed as a deduction in that year.

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

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

(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; or

(b) in a case, where the film producer 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 excessof the guaranteed amount, or where the film producer 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) Where the Assessing Officer is of the opinion that—

(a) the rights of exhibition of the feature film have been transferred by a mode not covered by this

rule; or

(b) having regard to the facts and circumstances of the case, it is not practicable to apply the

provisions of this rule, he may allow deduction in respect of cost of production of the film in such other manner as he may consider suitable.

(7) For the purposes of this rule,—

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

minimum guarantee basis; and

(b) the rights of exhibition of a feature film shall be considered to have been sold only on the date,—

(i) when the positive prints of the film are delivered by the film producer to the purchaser of such rights; or

(ii) when the negative of the film is delivered by the film producer to the film distributors defined in rule 273, where in terms of the agreement between the film producer and the film distributor, the positive prints are to be made by the film distributor.

(8) In this rule,—

(a) "Board of Film Censors" means the Board of Film Censors constituted under the Cinematograph Act,

1952 (37 of 1952); and

(b) "cost of production", in relation to a feature film, means the expenditure incurred on the production of

the film, not being—

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

(ii) the expenditure incurred in connection with the advertisement of the film after it is certified for release by the Board of Film Censors, and the cost of production of a feature film shall be reduced by the amount of subsidy received under any Government scheme, where such amount has not been included in the total income of the assessee for any tax year.