Per Shri S.P. Kapur, Judicial Member - The appeal is by the revenue and following specific contentions have been raised before us :

"On the facts and in the circumstances of the case, the learned Appellate Assistant Commissioner is not justified in holding that the provisions of rules 9A and 9B of the Income-tax Rules, 1962, are not applicable in this case and further directing the Income-tax Officer that the claim for amortization expenses of the assessee should be allowed as per CBDT Circular No. 154 dated 5-12-1975 which stands superseded by the introduction of rule 911 of the Income-tax Rules, 1962."

2. The respondent assessee is a resident-registered firm. The assessment year involved is 1977-78. The assessee-firm came into being on 19-12-1975 and accounting period observed for the assessment year under appeal ended on 31-10-1976. The business of the assessee-firm is exhibition and distribution of pictures. During the accounting period relevant to the assessment year under appeal, the assessee took on 'minimum guarantee basis' an old film 'Muje Jeene Do'. The amount paid was Rs. 2,00,000 and the film was taken from Ajanta Arts, Bombay. The assessee released this picture on 21-5-1976 but claimed Rs. 1,00,000 as expenses. The ITO, however, was of the opinion that since the minimum guarantee amount was Rs. 2,00,000 and since the picture was released on 21-5-1976 and since the accounting period of the assessee ended on 31-10-1976, the picture having been released 90 days before the end of the previous year, the assessee was required to claim the total of Rs. 2,00,000 as expenses. Accordingly, the assessee was called upon to show cause why the whole expenses of Rs. 2,00,000 be not allowed as expenses for the assessment year under appeal as against the claim of the assessee which stood at Rs. 1,00,000 for the assessment year under appeal and Rs. 1,00,000 for the subsequent assessment year, viz., 1978-79. The assessee filed written replies dated 29-1-1980 and 6-2-1980 and, inter alia, contended that statutory rule 9B of the Income-tax Rules, 1962, was inserted by the Income-tax (Seventh Amendment) Rules, 1916, and the same was published in the Official Gazette on 30-12-1976 and since the assessee closed the books of account on 31-10-1976, statutory rule 9B was not applicable. It was also contended that statutory rule 9B applied in the case of new pictures and not the old one, hence amortization expen-ses were claimed on the basis of Circular No. 154 of 1974 issued by the CBDT. Reliance was placed on the ratio of the decision of the Hon'ble Supreme Court in the case of Navnit Lal C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198. The assessee yet further contended that where a circular confers a right or privilege on an assessee and subsequently such circular is withdrawn, the assessee can still claim those rights and privileges conferred by the circular for the period during which the circular was in force.

The ITO did not agree with the contentions raised on behalf of the assessee. He held that Circular No. 154 of 1974 issued by the CBDT stands superseded on account of introduction of statutory rule 911 and, hence, the assessee cannot enjoy the privilege under the said circular. He also held that rule 9B(7)(a) provides for exercise of option in relation to assessment years commencing on 1-4-1973, 1-4-1974, 1-4-1975 and 1-4-1976, which once exercised has to be taken as final for those assessment years and subsequent assessment years and since statutory rule 911 was strictly to be followed for the assessment year under appeal, the assessee having not done so, the assessee was to be allowed the whole of the amount, viz., Rs. 2,00,000, as amortization expenditure. He relied on the ratio of the decision of the Hon'ble Supreme Court in the case of Sri Ramamohan Motor Service v. CIT [1973] 89 ITR 274 for the proposition that strict compliance with the requirements of statutory rules is called for, and, hence, substantial compliance is n