ACIT 16(1), MUMBAI V. FUN MULIPLEX P.LTD, MUMBAI

ITA 3630/MUM/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9582 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘F’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No. 3630/Del/2019 Assessment Years: 2010-11 ITA No. 3631/Del/2019 Assessment Years: 2011-12 ITA No. 6317/Del/2017 Assessment Years: 2013-14 ACIT-11(1), Mumbai Vs. M/s. Fun Multiplex P Ltd., (Now known as M/s. Cineplus India Pvt. Ltd.), 884/4, Shah Industrial Estate, New Link Road, Andheri(W), Mumbai-53 PAN :AAACE8924E (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeals by the Revenue arise out of three separate orders of learned Commissioner of Income-Tax (Appeals)-4, New Delhi pertaining to assessment years 2010-11, 2011-12 and 2013-14. Assessee by Ms. Hasneeta Matta, CA Department by Shri T. Kipgen, CIT DR Date of hearing 22.09.2022 Date of pronouncement .09.2022 2 ITA Nos.3630, 3631 & 6317/Del./2017 2. Grounds raised in the appeals are identical except variation in quantum. 3. The first common issue arising in these appeals relates to taxability of entertainment tax subsidy received by the assessee. 4. Briefly, the facts relating to this issue are, the assessee is a resident corporate entity engaged in the business of operation and management of multiplexes. In the relevant financial years, corresponding to the respective assessment years, assessee had received entertainment tax subsidy under a scheme formulated by the Government of Maharashtra. The object behind formulating such scheme is to encourage capital investment in multiplex/theater complex. As per the scheme, exemption from entertainment tax is allowed to the multiplexes for certain initial years of operation considering the fact that multiplexes are capital intensive and their gestation period is long in longer. 5. In course of assessment proceedings when the assessing officer called upon the assessee to explain why the entertainment tax subsidy received, being in the nature of revenue receipt, should not be brought to tax, the assessee submitted that the incentive given by the 3 ITA Nos.3630, 3631 & 6317/Del./2017 government is of capital nature, hence, not taxable. The assessing officer, however, was not convinced with the submissions of the assessee and proceeded to complete the assessments by bringing to tax the entertainment tax subsidy received by the assessees treating it as revenue in nature. Assessee contested the aforesaid additions before learned Commissioner (Appeals). 6. Being convinced with the submission of the assessee and following the ratio laid down in the decisions cited before him, learned Commissioner (Appeals) held that the entertainment tax subsidy received by the assessee is in the nature of capital receipt, hence, not taxable. Accordingly, he deleted the additions. 7. We have heard the parties and perused the material available on record. 8. It is common point before us that the issue is squarely covered by the decision of Hon'ble Supreme Court in case of CIT Vs. Chapalkar Brothers ( 400 ITR 279 ) 9. On a perusal of the aforesaid judgment of the Hon’ble Apex Court, it is observed, while considering the nature and character of entertainment tax subsidy received by multiplexes/cinema hall owners 4 ITA Nos.3630, 3631 & 6317/Del./2017 under the very same Scheme the Hon’ble Apex Court has held that the entertainment tax subsidy received is in the nature of capital receipt. In fact, in assessee’s own case in assessment years 2008-09 and 2009- 10, Hon’ble Bombay High Court while dismissing the appeals filed by the Revenue has upheld the decision of the Tribunal holding that the entertainment tax subsidy received by the assessee is in the nature of capital receipts. Further, in case of CIT vs. Bougainvillea Multiplex Entertainment Centre (P) Ltd. (55 taxmann.com 26), the Hon'ble Delhi High Court has expressed identical view. 10. Undisputedly, learned Commissioner (Appeals) while deciding the issue has followed the ratio laid down in the decisions cited supra. That being the case, we do not find any infirmity in the order of learned Commissioner (Appeals) on this issue. Accordingly, the order is upheld and grounds raised by the revenue are dismissed. 11. The next common issue arising in these appeals is, in case, the entertainment tax subsidy is held to be capital in nature, whether, it will go to reduce the cost of acquisition of capital assets resulting in disallowance of depreciation claimed by the assessee on plant and machinery to that extent. While framing the assessment, the assessing 5 ITA Nos.3630, 3631 & 6317/Del./2017 officer held that in case the appellate authorities hold that the entertainment tax subsidy received is in the nature of capital receipt, then, in terms of Explanation 10 to section 43(1) of the Act, subsidy should be reduced from the written down value of plant and machinery and thereafter depreciation is to be allowed. While, deciding this issue, learned Commissioner (Appeals) held that no such disallowance out of depreciation can be made, as, the incentives are provided for the purpose of cinema industry as a whole and not for any specified assets directly or indirectly. He held, since, the subsidy granted is not used for payment of actual cost of any fixed asset, it cannot be reduced from the written down value of the assets for computing depreciation. While doing so, he followed the decision of the Tribunal in case of PVR Ltd. vs. Addl. CIT, ITA No.1897/Del/2010 dated 20.04.2012. 12. Before us, both the parties agreed that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench in case of PVR Ltd. (supra). 13. Having considered the submissions of the parties and examined the facts on record in the light of decisions cited before us, we are of 6 ITA Nos.3630, 3631 & 6317/Del./2017 the view that entertainment tax subsidy granted by the State Government is not for the purpose of utilizing on any particular or specified assets. That being the factual position emerging on record, the reasoning of the assessing officer that such subsidy would go to reduce the cost of assets is unacceptable. More so, when the revenue has failed to bring any material on record to demonstrate that the subsidy has actually gone to reduce the cost of any specified assets on which the assessee claimed depreciation. That being the factual position, no part of the subsidy can be reduced from the written down value to compute depreciation. 14. Accordingly, we uphold the decision of the first appellate authority by dismissing the grounds. 15. In the result, all the appeals are dismissed. Order pronounced in the open court on 30 th September, 2022. Sd/- Sd/- (ANADEE NATH MISSHRA ) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30 th September, 2022. Mohan Lal 7 ITA Nos.3630, 3631 & 6317/Del./2017 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 27.09.2022 2. Date on which the draft of order is placed before the Dictating Member: 28.09.2022 3. Date on which the draft of order is placed before the other Member: 30.09.2022 4. Date on which the approved draft of order comes to the Sr. PS/PS: 29.09.2022 5. Date of which the fair order is placed before the Dictating Member for pronouncement: 29.09.2022 6. Date on which the final order received after having been singed/pronounced by the Members: 30.09.2022 7. Date on which the final order is uploaded on the website of ITAT: 30.09.2022 8. Date on which the file goes to the Bench Clerk 30.09.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for signature on the order: 11. Date of dispatch of order: