DCIT 9(2), MUMBAI V. NIMKO FINANCE P LTD, MUMBAI

ITA 3580/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88038 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEKAND PARAMPURNA
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, M UMBAI BEFORE S/SHRI D. KARUNAKAR RAO, (AM) AND AMIT SHUKLA, (JM) . , , ./I.T.A. NO3580/MUM/2012 ( ! / ASSESSMENT YEAR :2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE 9(2), ROOM NO.218, 2 ND FLOOR, AYAKAR BHAVAN, M K ROAD, MUMBAI. MUMBAI-400005 / VS. M/S NIKMO FINANCE PVT.LTD., 8 TH FLOOR, 349, BUSINESS POINT, WESTERN EXPRESS HIGHWAY, ANDHERI (E), MUMBAI-400069. ( '# / APPELLANT) .. ( $%'# / RESPONDENT) ' ./ &' ./PAN/GIR NO. :AABCN9974G '# ( / REVENUE BY SHRI VIVEKAND PARAMPURNA $%'# ) ( /ASSESSEE BY NONE * ) + / DATE OF HEARING : 1.12.2014 ,-! ) + /DATE OF PRONOUNCEMENT : 14.01.2015 / O R D E R PER AMIT SHUKLA, (JM) THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST THE ORDER 12.3.2012, PASSED UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2009-10 . 2. ONLY GROUND RAISED BY THE REVENUE READS AS UNDE R : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING ENTERTAINMENT D UTY COLLECTED BY THE ASSESSEE AS CAPITAL RECEIPT RELYING ON T HE DECISION OF THE HONBLE BOMBAY COURT IN THE CASE OF CIT V/S C HAPAHALKAR BROTHERS WITHOUT APPRECIATING THAT THE DEPARTM ENT HAS NOT ACCEPTED THE SAID DECISION AND HAS FILED AN SLP WH ICH IS I.T.A. NO.3580/MUM/2012 2 PENDING BEFORE THE HONBLE SUPREME COURT. THUS, THE SOLE GROUND RAISED BY THE REVENUE IS THA T THE DECISION OF THE HONBLE BOMBAY HIGH COURT HAS NOT BEEN ACCEPTED BY THE REVENUE AND SLP IS PENDING AGAINST THE SAID ORDER. 4. BRIEF FACTS ARE THAT, THE ASSESSEE IS IN THE BUS INESS OF RUNNING MULTIPLEX THEATRES IN THE STATE OF MAHARASHTRA. THE MAHARASHTRA GOVERNMENT IN ORDER TO ENCOURAGE THE SETTING UP OF MULTIPLEXES FOR VIEWING THE MOVIES GRANTED EXEMPTION FROM PAYMENT O F ENTERTAINMENT TAX. THE SCHEME FOR ENTERTAINMENT TA X EXEMPTION WAS THAT, THE AMOUNT WOULD BE ELIGIBLE FOR ENTERTAINMEN T TAX EXEMPTION OF 100% IN THE FIRST THREE YEARS AND IN SUBSEQUENT TW O YEARS 25% IS LEVIABLE AND SIXTH YEAR ONWARDS ENTERTAINMENT TAX I S FULLY LEVIABLE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD COLLECTED A SUM OF RS.2,00,52,640/- TOWARDS ENTERTAINMENT TAX F OR WHICH THE EXEMPTION WAS CLAIMED BY THE ASSESSEE AS IT REPRESE NTS CAPITAL SUBSIDY. THE AO TREATED IT AS REVENUE RECEIPT BY R ELYING ON THE FOLLOWING DECISIONS : A) CIT V/S FAKIRCHAND DAYARAM (188 CTR 57) (MP) B) SAHNEY STEEL AND PRESS WORKS (228 ITR 253)(SC) C) CIT V/S ABHISHEK INDUSTRIES (286 ITR 1) P&H) THE LD. CIT(A) HELD THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S CHAPAHALKAR BROTHERS IN ITA NO.103 6 OF 2010 IN I.T.A. NO.3580/MUM/2012 3 ORDER DATED 8.6.2011, HAS CONSIDERED THE ISSUE OF S UBSIDY OF ENTERTAINMENT TAX BY THE GOVERNMENT OF MAHARASHTR A AND HELD THAT IT IS A CAPITAL RECEIPT. THE LD. CIT(A) AFTER RELY ING UPON THE SAID DECISION OBSERVED AND HELD AS UNDER : 3. I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT. THE HONBLE BOMBAY H IGH COURT IN CIT VS CHAPHALKAR BROTHERS (ITXANO.1036 OF 2010 DATED 08.06.2011) CONSIDERED THE ISSUE OF SUBSIDY OF ENTE RTAINMENT TAX BY GOVERNMENT OF MAHARASHTRA. IT WAS HELD THAT: A SUBSIDY IS A CAPITAL RECEIPT WHEN IT IS FOR THE P ROMOTION OF A NEW INDUSTRY, WHILE IT IS A REVENUE RECEIPT LIABLE TO TAX IF IT IS GRANTED TO SUPPLEMENT THE PROFITS OF AN INDUSTRY, (I) THE SUBSIDY GRANTED BY THE STATE OF MAHARASHTRA, IS OR THE PROMOTION OF MULTIPLEXES, (II) THE SUBSIDY WAS GRANTED IN THE FORM OF A CONCESSIO N ON ENTERTAINMENT DUTY, (III) THAT THE OBJECT BEHIND THE SUBSIDY WAS TO PROMOTE CONSTRUCTION OF NEW CINEMA HOUSES', (IV) THE STATE GOVERNMENT HAD DECIDED TO GRANT THE SUBSIDY IN VIEW OF THE FACT THAT SETTING UP NEW MUL TIPLEX COMPLEXES IS HIGHLY CAPITAL INTENSIVE, WITH A LONG GESTATION PERIOD. 3.3.1. THE HONBLE BOMBAY HIGH COURT RELIED ON PONNI SUGARS (306 ITR 392) WHERE THE HONBLE SUPREME COUR T HAD EXPLAINED ITS PREVIOUS JUDGEMENT IN SAHNEY STEE L AND PRESS WORKS LTD V/S CIT (228 ITR 253) AS UNDER:- 'THE IMPORTANCE OF THE JUDGEMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYZED THE ENTIRE CASE LAW AND IT HAS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGI NG THE CHARACTER OF A SUBSIDY. THAT TEST IS THAT THE 1I, I.T.A. NO.3580/MUM/2012 4 CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESS EE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FO R WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT RELEVAN T. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR REPAYMENT O F LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS. ON THI S ASPECT THERE IS NO DISPUTE. IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT O F THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT.' 3.3.2. THE HONBLE BOMBAY HIGH COURT HELD THAT THE RATIO OF PONNI SUGARS WAS THAT ONLY THE OBJECT OF T HE SUBSIDY SCHEME MUST BE CONSIDERED AND ON THE FACTS OF THE CASE, THE SUBSIDY WAS INTRODUCED WITH THE OBJECT OF PROMOTING THE CONSTRUCTION OF MULTIPLEXES ; AND THE POINT OF TIME IN WHICH IT COULD BE AVAILED - THE FORM IN WHICH IT WAS GRANTED WAS NOT RELEVANT. THE HON'BLE BOMBAY HIGH COURT HELD:- THE FACT THAT THE SUBSIDY WAS NOT MEANT FOR REPAYING THE LOAN TAKEN FOR CONSTRUCTION OF MULTIPLEXES CANNOT BE A GROUND TO HOLD THAT SUBSIDY RECEIPT WAS ON REVENUE ACCOUNT, BECAUSE, IF THE OBJECT OF THE SCHEME WAS TO PROMOTE CINEMA HOUSES BY CONSTRUCTING MULTIPLEX THEATRES, THEN IRRESPECTIVE OF THE FACT THAT THE MULTIPLEXES HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS, THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. 3.3.3. FOLLOWING THE DECISION OF HONBLE BOMBAY HIG H COURT AS DISCUSSED ABOVE. THIS GROUND OF APPEAL IS ALLOWED. I.T.A. NO.3580/MUM/2012 5 5. THE LD. DR ADMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT BY WHICH T HE ISSUE OF ENTERTAINMENT TAX SUBSIDY HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE BY HOLDING THAT THE IT IS ON CAPITAL ACCOU NT AND NOT REVENUE RECEIPT. 6. AFTER CONSIDERING THE IMPUGNED ORDER AND ON PERU SAL OF RECORD, WE ARE OF THE OPINION THAT THE LD.CIT(A) IS JUSTIFI ED IN HOLDING ENTERTAINMENT DUTY COLLECTED BY THE ASSESSEE IS A CAPITAL RECEIPT AS IT IS IN CONFORMITY WITH THE DECISION OF THE JURISDICT IONAL HIGH COURT. ACCORDINGLY, WE AFFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE GROUND TAKEN BY THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14TH JAN, 2015 . ,-! . /0 14TH JAN, 2015 - ) 1* 2 SD SD ( . / D. KARUNAKAR RAO) ( / AMIT SHUKLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER * MUMBAI: 14TH JAN,2015. . . ./ SRL , SR. PS ' # $%& '&($ / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. ( ) / THE CIT(A)- CONCERNED 4. / CIT CONCERNED 5. 451 $6 , + 6 , * / DR, ITAT, MUMBAI CONCERNED 6. 1 7* / GUARD FILE. I.T.A. NO.3580/MUM/2012 6 / BY ORDER, TRUE COPY 8 & (ASSTT. REGISTRAR) + 6 , * /ITAT, MUMBAI