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Are ‘film and TV serial rights' intangible assets for income-tax purposes?
This vexed question has brought to the fore the difference of opinion on this matter between the Income-Tax Department and the public auditor – the Comptroller and Auditor-General of India (CAG).
Film rights are to be treated under copyrights and licences (Explanation 3 to Section 32 (1)) and hence come under the intangible assets referred to in Section 32 (2)(ii) of the income-tax law, the CAG has said in a report tabled in Parliament last week.
The CAG report related to taxation of assesses engaged in the film and television industry.
CAG has made this observation on film rights in the wake of an assessee claiming and the I-T department allowing entire expenditure on purchase of rights of feature films and TV serials as deduction for an assessment year.
Rather than allowing the entire expenditure on film rights as deduction, it should have been capitalised and depreciation allowed, the CAG has said.
“Reply of the department (Income-Tax department) that film rights do not fall under any of the categories of intangible assets is not tenable,” the CAG said in a chapter relating to ‘mistakes in assessments'.
Non-capitalising of the intangible assets of feature films and TV serials rights has resulted in short levy of tax, the CAG has said.
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