V. Ramaswami, J.
1. For the assessment year 1970-71, corresponding to the accounting year ending September 13, 1969, the assessee claimed amortisation in respect of thirteen films. The ITO held that full amortisation was allowable in respect of films which had been released six months before the end of the accounting year and that amortisation at half of the rate only could be allowed in respect of the films which were released during the second half of the accounting year. He also held that no amortisation was allowable in respect of the films which had not been released in the year of account.
2. The assessee was adopting a method of writing off the cost of the rights of the film distribution in the year of acquisition irrespective of the year of release. Accordingly, he claimed deduction in respect of the thirteen films. Aggrieved by the order of the ITO, who had not accepted this contention of the assessee, it preferred an appeal before the AAC. The AAC accepted the contention of the assessee that irrespective of the date of release it was entitled to full amortisation in respect of the films which were released during the accounting year. But he did not accept the contention of the assessee that it was entitled to amortisation even in respect of those films which were acquired during the accounting year but were not released.
3. Both the assessee and the department preferred appeals to the Tribunal. The tribunal found that the assessee was adopting a method of accounting by which he was writing off the entire cost of the distribution rights in the year of acquisition and that that had been accepted by the department for the assessment years 1967-68 to 1969-70. On the ground that the department had not shown that the method of accounting adopted by the assessee was such that the profits and gains could not properly be deduced, the Tribunal held that the assessee was entitled to amortisation in respect of those cases of films which were acquired during the accounting year but not released. In the result, therefore, the assessee was held to be entitled to the relief of writing-off in respect of the films which were acquired during the accounting year irrespective of their dates of release.
4. At the instance of the commissioner of Income-tax, the following two questions were referred by the Tribunal under s. 256(1) of the I. T. Act, 1961 :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amortisation amounts as claimed by the assessee should be allowed as a deduction in computing the total income of the assessee
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of section 145 would not apply to the assessee's case and that, therefore, no portion of the amortisation claim made by the assessee could be disallowed ?'
5. It appears that in the application for reference under s. 256(1) the department also asked for two more questions to be referred, but they were not referred on the ground that the questions already referred by the Tribunal are comprehensive enough to cover those two questions as well. By way of abundant caution, the department filed an application under s. 256(2), and this court directed the following two questions also to be referred :
'(i) Whether the Appellate Tribunal's finding that the assessee had adopted practice of writing off the entire cost of the distribution rights in the year of acquisition and valued the closing stock as 'nil' is based on the facts and circumstances in this case and is sustainable in law
(ii) Whether the Appellate Tribunal's finding that the method of writing off the cost of distribution rights in the year of acquisition itself is a proper method of accounting and that profits can be rightly deduced therefrom is proper and is reasonable on the facts found in this case ?'
6. There could be no doubt, and it has also been found by the tribunal as well as the authorities below, that right from the year 1965, when the assessee started its business of distribution of films it was adopting a method of accounting by writing off the entire cost of distribution rights in the year of acquisition itself and valuing the closing stock as 'nil'. This practice of writing off in the year of acquisition had been accepted by the department for the assessment years 1967-68 to 1969-70.
7. The learned counsel for the commissioner would only contend that the acceptance of the method of accounting in the previous years would not prevent the ITO from not accepting the same in the assessment year now in question, if he were to come to the conclusion that the method employed by the assessee is such that the income cannot properly be deduced therefrom. As a proposition of law, this cannot be disputed. But, how the learned counsel is contending that the method employed by the assessee is such that the income cannot properly be deduced therefrom, has not been made out. It may be that the method of writing off in the yea of release of the picture, or the elapsing of a particular period from the date of release in order to write off the entire value of acquisition, is a proper method. But that will not mean that it is wrong in principle to write off the value of acquisition in the year of acquisition itself. Nor can we say with definiteness that by adopting such a method the profits and gains can not properly be deduced therefrom. We have also to keep in mind that while s. 145 enables the ITO not to accept the method of accounting of the assessee if we was of the opinion that the method employed is such that the income cannot properly be deduced therefrom, there is no power in the ITO to impose his own method. As already stated, the assessee was adopting the practice of writing of the entire cost of distribution rights in the year of acquisition, and that was accepted by the department in the previous years. As rightly pointed out by the Tribunal, it has not been established that the method of accounting regularly followed by the assessee in the past is such that the income, profits and gains cannot properly be deduced therefrom. We, accordingly, answer all the questions in the affirmative and in favour of the assessee. The assessee will be entitled to its costs. Counsel's fee Rs. 500, one set.