M G PICTURES MADRAS LTD Vs. ASST CIT

JUDGEMENT

(1.) THIS appeal is directed at the instance of the assessee against the order passed by the Income Tax Appellate Tribunal, Madras 'B' Bench. It seems to have been admitted for motion hearing on the basis on the following substantial question of law:

(2.) WHETHER on the facts and in the circumstances of the case the Appellate Tribunal was right in holding that the amendment to the provisions of Section 40A(3) is not a procedural one but a substantive one?"

(3.) THE next contention of the learned counsel was in respect of Sec. 40A(3) of the Act. He assails the finding of Income Tax Appellate Tribunal in so far as it pertains to some films which were produced prior to the amendment to Sec. 40A(3). It will be seen that the Tribunal had allowed the appeal in respect of the expenditure incurred in respect of the film 'Thirumoorthy' on the ground that the relevant assessment year in respect of the income derived from that film would be 1996-97. THE contention was that in respect of such payments, which were made in breach of Sec. 40A(3), the disallowance of the expenditure would be only 20% and thus the rest of 80% would be the allowable expenditure. According to the learned counsel from the language of Sec. 40A(3), the amendments made thereto and from the language of second proviso to that section, the Tribunal should not have restricted the disallowance to 20% only in respect of a movie made after the amendment to the section. He further contends that the amendment to the section is in the nature of a procedural amendment and, therefore, it would apply to all the earlier payments made by cash (not by cheques as provided by the section). Learned counsel assails the interpretation put forward by the Tribunal that the amendment to Sec. 40A(3) is not procedural in nature and is, therefore, not retrospective. Indeed, the Tribunal has held this amendment to be prospective and, therefore, has given the benefit of this amendment only in respect of the Tamil movie 'Thirumoorthy', the relevant year for which is 1996-97. Before proceeding to appreciate the argument, it will be better to see the relevant portion of the section: