CINEMAX INDIA LTD, MUMBAI V. DCIT 8(1), MUMBAI

ITA 1287/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75297 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Depreciation; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AN D DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 1287/MUM/2012 ASSESSMENT YEAR: 2009-10 CINEMAX INDIA LTD. ATTRIUM-215, 10 TH FLOOR, NEAR MARRIOT COURT YARD, ANDHERI- KURLA ROAD, ANDHERI (E) MUMBAI-. 400 059 VS. DCIT 8(1), AAYAKAR BHAVAN, 2 ND FLOOR, NEW MARINE LINES MUMBAI-20 (APPELLANT) (RESPONDENT) ITA NO. 1483/MUM/2012 ASSESSMENT YEAR: 2009-10 DCIT 8(1), AAYAKAR BHAVAN, 2 ND FLOOR, NEW MARINE LINES MUMBAI-20 VS. CINEMAX INDIA LTD. BUSINESS POINT-349, 8 TH FLOOR, WESTERN EXPRESS HIGHWAY, ANDHERI (EAST) MUMBAI-. 400 069 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :- AACCC 1775 F ASSESSEE BY : SHRI VIJAY MEHTA & ANUJ KISNADWALA REVENUE BY : SHRI A.C. TEJPAL DATE OF HEARING : 02.01.2014 DATE OF PRONOUNCEMENT : 24.01.2014 O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE REVENUE AND THE AS SESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-16, MUMBAI DATED 26.12.2011 FOR THE ASSESSMENT YEAR 2009-10. THE GROUNDS RAISED IN THE SAID APPEALS RELATE TO TH E ISSUE ON THE TREATMENT GIVEN TO THE SUBSIDY OF RS. 5,57,72,578/- COLLECTED IN THE FORM OF ENTERTAINMENT TAX. 2. THE RELEVANT FACTS ARE THAT THE ASSESSEE, A COMP ANY ENGAGED IN THE BUSINESS OF EXHIBITION OF FILMS, BUILDERS AND DEVELOPERS, DURIN G THE YEAR UNDER CONSIDERATION, COLLECTED ITA NO. 1287/MUM/2012 ITA NO. 1483/MUM/2012 CINEMAX INDIA LTD. ASSESSMENT YEAR: 2009-10 2 A SUM OF RS. 5,57,72,578/- TOWARDS ENTERTAINMENT TA X FOR WHICH EXEMPTION WAS GRANTED TO THE ASSESSEE FROM PAYMENT OF THE SAME. THE ASSES SEE HAD CLAIMED THE ENTERTAINMENT DUTY COLLECTED WHICH REPRESENTS CAPITAL SUBSIDY REC EIPT AND NOT LIABLE TO BE TAXED. HOWEVER, IN THE ASSESSMENT FRAMED, THE AO HAD REJEC TED THE CLAIM BY STATING THAT THE ASSESSEE HAD CONSISTENTLY BEEN SHOWING THE ENTERTAI NMENT TAX COLLECTED AS REVENUE RECEIPTS WITHOUT BIFURCATING THE AMOUNT OF ENTERTAI NMENT TAX SEPARATELY. THE AO FURTHER HELD THE ENTERTAINMENT TAX WAS COLLECTED BY THE ASS ESSEE FOR EXHIBITING THE FILMS WHICH WAS THE BUSINESS OF THE ASSESSEE AND THEREBY TREATE D THE SAID RECEIPT AS REVENUE IN NATURE AND ACCORDINGLY BROUGHT THE SAME TO TAX. WIT HOUT PREJUDICE TO THE SAID DECISION, THE AO FURTHER HELD THAT THE GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE COST OF THE ASSETS AND HENCE THE ALLEGED AMOUNT OF ENTERTAI NMENT TAX COLLECTED HAD TO BE REDUCED FROM THE COST OF ASSET FOR THE PURPOSE OF D EPRECIATION IF IT IS TREATED AS CAPITAL RECEIPT. ON APPEAL, THE LD.CIT(A) WHILE PARTLY ALLO WING THE CLAIM OF THE ASSESSEE HELD THAT THE IMPUGNED AMOUNT TO BE TREATED AS CAPITAL RECEIP T AND ACCORDINGLY DELETED THE SAID ADDITION BY RELYING ON THE DECISION IN THE CASE OF CHAPHALKAR BROTHERS. HOWEVER, THE LD.CIT(A) DIRECTED THE AO TO ALLOW DEPRECIATION ON THE REDUCED COST OF ASSET. AGGRIEVED BY THE IMPUGNED DECISION, THE REVENUE AND THE ASSES SEE ARE IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. FIRSTLY , ON THE ISSUE RAISED BY THE REVENUE CLAIMING THAT THE ENTER TAINMENT TAX/DUTY COLLECTED BY THE ASSESSEE IS TO BE TREATED AS A REVENUE RECEIPT, IT IS PERTINENT TO MENTION THAT THE CASE OF THE ASSESSEE SQUARELY COVERED BY THE DECISION OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHAPHALKAR BROTHERS, DATED 08.06.20 11, WHEREIN IT HAS BEEN HELD THAT THE SUBSIDY OF THIS KIND CONSTITUTES CAPITAL RECEIPTS A S IT IS MEANT FOR PROMOTION OF THE NEW INDUSTRIES BY WAY OF MULTIPLEX THEATRES, IN OUR VIE W, HAS BEEN RIGHTLY FOLLOWED BY THE LD.CIT(A) FOR TREATING THE IMPUGNED AMOUNT AS CAPIT AL RECEIPTS. IT IS ALSO RELEVANT TO MENTION THAT THE FACT OF THE ASSESSEES CASE IS ALS O COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEES SISTER CONCERN CASE NAMELY VISTA ENTERTAINMENT PVT. LTD. IN ITA NO. 8402/MUM/2011 FOR THE ASSESSMENT YEAR 2008-09, THE ORDER TO WHICH THE PRESENT AM IS ALSO A PARTY, WHEREIN IT HAS BEEN HELD THAT SIMILAR ADDITIONS ARE NOT SUSTAINABLE SINCE THE SAME AMOUNTS TO CAPITAL IN NATURE. FOLLOWING THE AB OVE DECISIONS IN THE SIMILAR CONTEXT OF FACTS INVOLVED, WE DO NOT FIND ANY JUSTIFIABLE REAS ON TO INTERFERE WITH THE DECISION OF THE ITA NO. 1287/MUM/2012 ITA NO. 1483/MUM/2012 CINEMAX INDIA LTD. ASSESSMENT YEAR: 2009-10 3 LD.CIT(A) IN TREATING THE IMPUGNED AMOUNT AS CAPITA L RECEIPT AND THE SAME NOT LIABLE TO TAX. ACCORDINGLY, THE DECISION OF THE LD.CIT(A) ON THIS COUNT IS UPHELD. 4. SECONDLY , AS REGARDS THE ISSUE RAISED IN THE ASSESSEES APP EAL REGARDING THE REDUCTION FROM THE WDV OF BLOCK OF ASSET AND TO ALL OW THE DEPRECIATION ON THE REDUCED VALUE OF WDV ACCORDINGLY, IT IS PERTINENT TO MENTIO N THAT SIMILAR ISSUE HAS BEEN ELABORATELY DISCUSSED BY THE TRIBUNAL IN THE CASE O F M/S. PVR LTD. IN ITA NO. 1897/DEL/2011, WHEREIN IT HAS BEEN HELD THAT THE AM OUNT OF SUCH SUBSIDY CANNOT BE HELD TO REDUCE THE ACTUAL COST OF ASSETS U/S 43(1) EXPLA NATION 10 OF THE ACT. FOR THE SAID DECISION, THE TRIBUNAL IN TURN HAS RELIED ON THE JU DGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. P.J. CHEMICALS LTD. 210 ITR 830(SC) . SINCE SIMILAR FACTS ARE INVOLVED IN THE ASSESSEES CASE ALSO, FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE AMOUNT OF SUBSIDY CANNOT BE HELD TO REDUCE THE ACTUAL COST OF ASSET U/S 43(1) EXPLANATION 10 OF THE ACT. ACCORDINGLY WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF JANUARY, 2014. SD/- SD/- (D. KARUNAKARA RAO) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.01.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.