M/s. Inox Leisure Ltd., Baroda V. The Dy.CIT.,Circle-1(2), Baroda

ITA 2302/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1816 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Question of law; Cost of acquisition; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 374 & 523/AHD/2012 (ASSESSMENT YEAR: 2008-09) INOX LEISURE LTD., 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, BARODA- 390007 DEPUTY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BARODA V/S V/S DEPUTY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BARODA INOX LEISURE LTD., 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, BARODA- 390007 (APPELLANT) (RESPONDENT) ITA. NOS: 2302 & 2552/AHD/2012 (ASSESSMENT YEAR: 2009-10) INOX LEISURE LTD., 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, BARODA- 390007 DEPUTY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BARODA V/S V/S DEPUTY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), BARODA INOX LEISURE LTD., 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, BARODA- 390007 (APPELLANT) (RESPONDENT) PAN: AAACI6063J ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 2 APPELLANT BY : SHRI S. N. SOPARKAR, AR RESPONDENT BY : SMT. VIBHA BHALLA, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 06 -04-20 16 DATE OF PRONOUNCEMENT : 13-04-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 374 & 523/AHD/2012 ARE CROSS APPEALS OF TH E ASSESSEE AND THE REVENUE PREFERRED AGAINST THE VERY SAME ORDER O F THE LD. CIT(A)-I, BARODA DATED 05.12.2011 PERTAINING TO A.Y. 2008-09 AND ITA NOS. 2302 & 2552/AHD/2012 ARE CROSS APPEALS OF THE ASSES SEE AND THE REVENUE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-I, BARODA DATED 22.08.2012 PERTAINING TO A.Y. 2009-201 0. 2. IN THE IMPUGNED APPEALS OF THE ASSESSEE AND THE REV ENUE, THE GRIEVANCE IS COMMON IN BOTH THE YEARS; THEREFORE, A LL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COM MON ORDER FOR THE SAKE OF CONVENIENCE. WE FIRST TAKE UP ITA NO. 374/AHD/2012 ASSESSEES AP PEAL FOR A.Y. 2008-09. 3. THE SOLE OF THE ASSESSEE RELATES TO THE ADDITION OF RS. 1,58,90,158/- ON ACCOUNT OF ESOP. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O NOTICED THAT THE ASSESSEE DISALLOWED AN AMOUNT OF R S. 1,97,05,624/-, BEING AMOUNT DEBITED IN THE PROFIT AND LOSS ACCOUNT IN RESPECT OF ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 3 REMUNERATION TO EMPLOYEES BY WAY OF ESOP. THE A.O F URTHER OBSERVED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE ASSESSEE HAD CLAIMED THAT DEDUCTION WAS ALLOWABLE AS IT WAS A CHARGE TO PROFIT AND LOSS ACCOUNT IN RESPECT OF SUCH REMUNERATION TO EMPLOYEES. THE ASSESSEE FURNISHED A COMPLETE COMPUTATION OF THE CL AIM WHICH IS INCORPORATED IN THE ASSESSMENT ORDER BY THE A.O. AT PARA 7 FROM PAGE 4 TO PAGE 8 OF THE ASSESSMENT ORDER. AFTER CONSIDER ING THE CLAIM AND THE COMPUTATION MADE BY THE ASSESSEE, THE A.O WAS O F THE OPINION THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE. THE A.O FURTHER OBSERVED THAT NO PAYMENT IS MADE BY THE ASSESSEE EI THER IN THIS YEAR OR ANY EARLIER YEAR OR ANY LATER YEAR. THE ASSESSEE HAS MERELY ALLOTTED SHARES TO THE EMPLOYEES. ALLOTMENT OF SHARES CANNOT BE CONSIDERED AS AN ALLOWABLE EXPENDITURE. THE A.O ACCORDINGLY DISAL LOWED THE CLAIM OF DEDUCTION. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF CERA SA NITARYWARE LTD. IN ITA NO. 2817 & 2877/AHD/2011. THE LD. COUNSEL FURTH ER STATED THAT THE HONBLE HIGH COURT OF MADRAS AND THE HONBLE HIGH C OURT OF DELHI HAVE DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. PER CONTRA, THE LD. D.R. COULD NOT BRING A NY DISTINGUISHING DECISION IN FAOVUR OF THE REVENUE. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL. TH E CO-ORDINATE BENCH ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 4 IN THE CASE OF THE CERA SANITARYWARE LTD. (SUPRA) H AS CONSIDERED THIS ISSUE AT PARA 9 OF ITS ORDER AND AT PARA 10, THE TR IBUNAL CONSIDERED THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BIOCON LTD. 25 ITR (TRIB.) 602 AND AFTER CONSIDERING THE DECISION OF THE SPECI AL BENCH DIRECTED THE A.O TO CLAIM OF DEDUCTION. 8. THE HONBLE HIGH COURT OF MADRAS IN THE CAS E OF PVP VENTURES LTD. 25 TAXMANN.COM 286 HAS ALLOWED SUCH CLAIM AS B USINESS EXPENDITURE AND THE HONBLE HIGH COURT OF DELHI IN THE CASE OF LEMON TREE HOTELS LTD. IN ITA NO. 107/2015 HAS FOLLOWED T HE DECISION OF THE HONBLE HIGH COURT OF MADRAS HELD THAT COST OF ESOP COULD BE DEBITED IN PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. RESPECT FULLY FOLLOWING THE AFOREMENTIONED DECISIONS, WE DIRECT THE A.O TO ALLO W THE CLAIM OF DEDUCTION ON ACCOUNT OF REMUNERATION TO ESOP. GROUN D NO. 1 IS ACCORDINGLY ALLOWED. ITA NO. 523/AHD/2012 REVENUES APPEAL FOR A.Y . 2008-09 9. THE FIRST GRIEVANCE OF THE REVENUE RELATES T O THE TREATMENT OF ENTERTAINMENT TAX EXEMPTION IN RESPECT OF MULTIPLEX ES AS CAPITAL RECEIPT. 10. BY SCRUTINIZING THE REVISED RETURN OF INCOME, THE A .O FOUND THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF ENTERTAINMENT TAX WHICH WAS REFLECTED IN THE BOX OFFICE REVENUES IN RESPECT OF ITS MULTIPLEXES AT PUNE, VADODARA, ELGIN ROAD, SALT LAKE, NARIMAN POIN T, INDORE, DARJEELING AND SWABHUMI AND LUCKNOW. THE A.O NOTICE D THAT THE ASSESSEE HAS CLAIMED AN AGGREGATE SUM OF RS. 15,27, 28,335/- AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX . THE A.O OBS ERVED THAT IN EARLIER ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 5 ASSESSMENT YEARS I.E. A.Y. 2003-04, 2004-05, 2005-0 6, 2006-07 AND A.Y. 2007-08, THE ENTERTAINMENT TAX HAS TREATED AS A REVENUE RECEIPT. THE A.O FURTHER FOUND THAT THE FIRST APPELLATE AUTH ORITY IN ALL THE PREVIOUS YEARS HAS DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE. SINCE THE REVENUE HAS PREFERRED APPEALS BEFORE THE TRIBUN AL, THE A.O TREATED THE ENTERTAINMENT TAX AS A REVENUE RECEIPT. 11. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISS IONS AND THE ORDERS OF HIS PREDECESSOR WHICH WERE CONFIRMED BY THE TRIB UNAL, THE LD. CIT(A) DIRECTED THE A.O TO DELETE THE IMPUGNED ADDI TION. 12. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 13. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT THIS ISSUE IS NOW WELL SETTLED IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE BY THE DECISIONS OF THE TRIBUNAL IN EARLIER ASSESSMENT YEARS WHICH HAVE BEEN CONFIRMED BY THE HONBLE JURISDICTI ONAL HIGH COURT. THE LD. COUNSEL SUPPLIED THE COPIES OF THE ORDERS. THE LD. D.R. COULD NOT BRING ANY BINDING DECISION IN FAVOUR OF THE REV ENUE. 14. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW QUA THE ISSUES. THERE IS NO DISPUTE THAT THE A.O HAS MA DE THE ADDITIONS BASED UPON THE FINDINGS GIVEN IN EARLIER ASSESSMENT YEARS. IT IS ALSO AN UNDISPUTED FACT THAT IN EARLIER ASSESSMENT YEARS, T HE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. THE HONBLE HIGH COURT OF GUJARAT IN TAX APPEAL NO. 110 OF 2015 HAD THE OCCASION TO CONSIDER THE FOLLOWING QUESTION OF LAW: - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN LAW IN UPHOLDING THE DECISION OF THE C IT(A) DIRECTING THE A.O. TO ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 6 TREAT THE ENTERTAINMENT TAX EXEMPTION IN RESPECT OF MULTIPLEXES AS CAPITAL RECEIPT, NOT ELIGIBLE TO TAX, WITHOUT APPRECIATING THAT THE SUBSIDY RECEIVED BY THE ASSESSEE WAS AFTER THE COMPLETION OF THE CINEMA HOUSE AND CO MMENCEMENT OF OPERATION AND USED ENTIRELY FOR THE BUSINESS OPERATION, AND T HEREFORE, REVENUE IN NATURE? 15. WHILE ANSWERING THIS QUESTION IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE, THE HONBLE JURISDICTIONAL HIG H COURT CONSIDERED ITS OWN DECISION IN ASSESSEES OWN CASE GIVEN IN TA X APPEAL NO. 167 OF 2012 DECIDED ON 08/01/2013 AND FOLLOWING ITS OWN OR DER. THE HONBLE HIGH COURT THUS CONCLUDED UNDER THE CIRCUMSTANCES, THE APPEAL IS MERITLESS AND DESERVES TO BE DISMISSED. HENCE, DISM ISSED BUT WITH THE OBSERVATION THAT IF ANY VIEW IS TAKEN BY THE APEX C OURT IN THE ABOVEREFERRED CIVIL APPEAL, IT WOULD HOLD THE FIELD , BUT IT WOULD BE FOR THE REVENUE TO TAKE APPROPRIATE STEPS AND PROCEEDIN GS IN THIS REGARD. 16. AS MENTIONED ELSEWHERE, NO BINDING DECISION HAS BEE N BROUGHT TO OUR NOTICE. RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DECLINE TO INTERFERE. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 17. GROUND NO. 2 RELATES TO THE DECISION OF THE ADDITIO N OF RS. 69,30,298/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPE NDITURE ON PRINTS TREATING IT AS CAPITAL EXPENDITURE. 18. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FO UND THAT THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACQUISITION OF DISTRIBUTION RIGHTS, PRINT COST AT RS. 69,30,298/- AS REVENUE EXPENDITUR E. THE A.O FURTHER FOUND THAT THE ASSESSEE HAD AMORTIZED IT AGAINST TH E PRINT DISTRIBUTION RIGHTS AND CONTRACTS. THE A.O NOTICED THAT THE ASSE SSEE HAS CLAIMED PRINT COST OF RS. 69,30,298/- AS REVENUE EXPENDITUR E. THE A.O WAS OF ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 7 THE FIRM BELIEF THAT THE SAID EXPENDITURE HAS GIVEN THE ASSESSEE ENDURING BENEFIT AND, THEREFORE, HAS CONSIDERED AS CAPITAL EXPENDITURE. THE A.O ACCORDINGLY DISALLOWED THE CLAIM OF RS. 69, 30,298/-. 19. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND VEHEMENTLY SUBMITTED THAT THE EXPENDITURE INCURRED ON PRINT COST IS A REVENUE EXPENDITURE AND HAS TO BE ALLOWED ACCORDING LY. IT WAS EXPLAINED THAT SUCH EXPENDITURE DO NOT CONSTITUTE A NY ENDURING BENEFIT, FURTHER ONLY LIMITED RIGHTS ARE GRANTED TO THE ASSESSEE. NO OWNERSHIP RIGHTS HAVE BEEN BESTOWED UPON THE ASSESS EE AND, THEREFORE, THE CLAIM HAS TO BE ALLOWED U/S. 37(1) O F THE ACT. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS CONVINCED THAT IN RESPECT OF ACTUAL POSITIVE PRINTS OF THE FILMS EXHIBITED UNDER THE DISTRIBUTION ARRANGEMENT ENTERED INTO BY THE ASSESSEE WITH VARIOUS PARTIES. AS PER THE DISTRIBUTION AGREEMENT, PRINTS WERE PROPERTY OF PARTY SELLING DISTRIBUTION RIGHTS AND N OT THE ASSESSEE. ASSESSEE HAD THE RIGHT TO USE SUCH PRINTS ONLY TILL THE DISTRIBUTION ARRANGEMENT LASTED. THE LD. CIT(A) FURTHER OBSERVED THAT THE PRINT COST IS NOT INCLUDED IN COST OF ACQUISITION OF FEATURE F ILM AS PER EXPLANATION BELOW RULE 9B(1) AND IS TO BE ALLOWED SEPARATELY AS REVENUE EXPENDITURE. THE LD. CIT(A) ACCORDINGLY DIRECTED TO TREAT THE PRINT COST AS REVENUE EXPENDITURE. 20. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE L D. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 21. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. RULE 9B OF THE INCOME TAX RULES CLEARLY AND ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 8 SPECIFICALLY PROVIDES THAT COST OF PRINTS CANNOT BE INCLUDED IN THE COST OF ACQUISITION OF THE EXHIBITION RIGHTS IN THE FILM . THEREFORE, WHAT CAN BE CARRIED FORWARD ARE THE COST OF ACQUISITION AND NOT THE COST OF PRINTS. IN OUR CONSIDERED OPINION, THE COST OF PRIN TS HAS TO BE ALLOWED IN THE YEAR IN WHICH THE EXPENDITURE IS INCURRED. I T IS IRRELEVANT AS TO WHAT TREATMENT THE ASSESSEE HAS GIVEN IN ITS BOOKS OF ACCOUNTS AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TUTICOR IN ALKALI CHEMICALS & FERTILIZERS LTD. 227 ITR 172. CONSIDERING THE FAC TS IN TOTALITY, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. C IT(A). GROUND NO. 2 IS ACCORDINGLY DISMISSED. 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ITA NO. 2302/AHD/2012 ASSESSEES APPEAL FOR A.Y. 2009-10 23. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE CLAIM OF DEDUCTION ON ACCOUNT OF ESOP. 24. AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY US IN ITA NO. 374/AHD/2012 QUA GROUND NO. 1 OF THAT APPEAL. F OR OUR DETAILED DISCUSSION THEREIN, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. 25. SINCE WE HAVE ALLOWED THE FIRST GROUND OF APPEAL, T HE SECOND GROUND OF APPEAL BECOMES OTIOSE. 26. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 2552/AHD/2012 REVENUES APPEAL FOR A.Y . 2009-10 ITA NOS. 374 , 523, 2302 & 2552/A/12 . A.YS. 2008-0 9 & 2009-10. 9 27. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO THE TR EATMENT OF ENTERTAINMENT TAX EXEMPTION AS CAPITAL RECEIPT. 28. AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DECIDED BY US IN ITA NO. 523/AHD/2012 QUA GROUND NO. 1 OF THAT APPEAL. F OR OUR DETAILED DISCUSSION THEREIN, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 04 - 2016 . SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD