BHARANI PICTURES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions were referred to us under S. 66(2) of the Indian IT Act :

(2.) THE questions arise in relation to the assessment of the Bharani Pictures for the year 1949 -50, the year of account ending with 31st Dec., 1948. The assessee is a registered firm consisting of two partners, Mrs. P. Bhanumathi, a cinema actress, and her husband, P. Ramakrishna Rao. The firm was engaged in the business of producing cinematograph films, and it commenced its business in September, 1945. The first of the two questions set out above relates to the assessment of the profits earned from one of the pictures produced by the firm, viz., Rathnamala. When the case was taken up for hearing the learned advocate for the assessee intimated that the assessee does not want to press for the decision of the Court in question No. 1. We, therefore, consider it unnecessary to offer our opinion on the point covered by the question.

(3.) THE assessee did not itself advance any substantial sum of money; it entered into a financial agreement with one D. Rama Doss, who agreed to finance half the amount required by the assessee for the production of the picture, on his being paid half share in the collections out of the assessee's 2/3rd share in the picture. Rama Doss paid Rs. 35,100 towards his share of the finance. The process of production commenced. The artists were paid some salary, and certain other expenses were also incurred. A sum of Rs. 39,957 -15 -2 was spent by the assessee, that is, a little over what Rama Doss had paid. Disputes then arose between the partners. The parties agreed to adjust their differences, by the assessee retiring from the venture on being paid a certain amount, and Balaji Pictures and Rama Doss joining together to complete the picture. The agreement is in writing, and is dt. 25th Aug., 1948. Under its term, the assessee was paid a further sum of Rs. 37,500 in full quit of its interest in the picture, and the amounts expended for the same. It was also agreed that Mrs. Bhanumathi and a few of the actors, who had evidently been engaged by the assessee, were to be released from their obligation to act in the picture. The effect of the transaction was the assessee got Rs. 35,100 from Rama Doss and Rs. 37,500 under the release deed, while the expenses amounted to only Rs. 39,957 -15 -2, the profits being Rs. 32,642.