Deduction in respect of expenditure on production of feature films

The cases (sub-rules 2 to 4).

• Certified for release in the tax year, and all exhibition rights sold in that year: the entire cost of production is deducted that year.
• The producer exhibits the film commercially in some or all areas, or sells rights for some areas, or both, and the film is released commercially at least ninety days before the end of the year: the entire cost is deducted that year.
• Same, but released less than ninety days before year end: the cost is deducted only up to the amount realised from exhibition, from sale of exhibition rights, or both, and the balance is carried forward and deducted in the next tax year.
• The producer neither exhibits the film commercially nor sells exhibition rights in the year: no deduction that year, and the entire cost is carried forward and deducted in the next tax year.

Conditions (sub-rule 5). The deduction is not allowed unless the amount realised, or the amount for which rights were sold (or both), is credited in the books of account for the year in which the deduction is admissible; or, where rights were transferred on a minimum guarantee basis, the minimum amount guaranteed and any excess received or due (or, on a cash system, received) is so credited.

Discretion and meaning (sub-rules 6 to 8). The Assessing Officer may allow the deduction in another manner where rights were transferred by a mode not covered or applying the rule is not practicable. Sale of exhibition rights includes lease or transfer on a minimum guarantee basis, and rights are treated as sold only on the date the positive prints are delivered to the purchaser or, where the distributor makes the prints, the date the negative is delivered to the distributor. "Cost of production" excludes the cost of preparing positive prints and advertising after certification, and is reduced by any Government subsidy not included in total income.