COMMISSIONER OF INCOME TAX Vs. SADHANA NAYAR

JUDGEMENT

(1.) BY this reference made under section 256(1) of the Income -tax Act, 1961, the Income -tax Appellate Tribunal has referred the following question to this court for its opinion :

(2.) THE relevant assessment year is the assessment year 1975 -76. The accounting period relevant to the previous year ended on March 31, 1975.

(3.) MESSRS . Navketan International Films Pvt. Ltd. was the producer of a film named 'Ishk Ishk Ishk'. By an agreement dated July 3, 1974, Messrs. Navketan International Pvt. Ltd. appointed Messrs. S. P. Pictures as distributor of the said picture in the territories comprising the Bombay circuit as known in the film trade. By clause 5 of the said agreement, it was provided that the distribution period stipulated upon was a period of 11 years from the date of the first release of the said picture in any part of the said territory. The said Messrs. S. P. Pictures agreed to pay a sum of Rs. 16,51,000 to the producer as and by way of minimum guarantee as provided in clause 7 of the said agreement. On July 8, 1974, a written agreement was arrived at between Messrs. S. P. Pictures and Messrs. Sadhana Enterprises, a sole proprietary concern of the assessee, whereunder the parties to the agreement agreed to share profit or loss in respect of distributorship rights acquired under the agreement dated July 3, 1974, referred to hereinabove in the ratio of 40 per cent. for the assessee and 60 per cent. for Messrs. S. P. Pictures, i.e., Mr. S. P. Seth. By clause 10 of the said agreement, it was provided that the tenure of the agreement shall be for the period of and up to the expiry of the said agreement dated July 3, 1974, i.e., for a period of 11 years from the date of the first release of the said picture in the distribution territories, i.e., Bombay circuit or any part thereof.