tv channel buys movie rights

Moreshwar B. Panchal (Querist) 06 May 2008 This query is : Resolved
Suppose that there's a tv channel which buys the right to telecast a movie say twice in a year for three years and pays the entire amount in the first yer say Rs. 3,00,000....

Will this entire amount be allowed in the year of payment if the tv channel follows accrual system of accounting???

Kindly support will relevant sections & case studies...

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J K Agrawal (Expert) 12 May 2008
Dear Mr Panchal
As far as it relates to calculation of profit for the purpose of income tax liability calculation it is well settled that the Income Tax is payable on total accrued income of the previous year. In your case the payment is for next three years and the expenditure made in advance is only prepaid expenditure. Prepaid expenditure is not deductible from Gross Total Income.
relevant case law can be suggested on personal contact by email.

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