ACIT 2(3), MUMBAI V. VISTA ENTERTAINMENT P.LTD, MUMBAI

ITA 4354/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71906 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 26-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Keywords: Rule of consistency; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.4354/M/2012 (AY: 2009 - 2010) ACIT - 2(3), R.NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. VISTA ENTERTAINMENT P. LTD ., 215, ATRIUM, 10 TH FLOOR, CTS NO. 215, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 059. ./ PAN : AABCV 5125 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH RANJAN PRASAD, DR / RESPONDENT BY : SHRI ANUJ KISHNADWALA / DATE OF HEARING : 02.12.2013 / DATE OF PRONOUNCEMENT : 11 .12.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 26.6.2012 IS AGAINST THE ORDER OF THE CIT (A) - 6, MUMBAI DATED 27.4.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) ERRED IN TREATING THE RETENTION OF ENTERTAINMENT TAX OF RS. 5,36,54,552/ - COLLECTED BY THE ASSESSEE FROM THE CUSTOMERS AS CAPITAL REC EIPT WITHOUT APPRECIATING THE FACT THAT THE SUBSIDY RECEIVED THEREIN HA THE CHARACTER OF REVENUE. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE DECISION OF THE CIT (A) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. AT THE OUTSET, SHRI ANUJ KISHNADWALA BROUGHT OUR ATTENTION TO THE ORDER OF THE ITAT, MUMBAI IN ASSESSEES OWN CASE VIDE ITA NO.8402/M/2011 FOR THE AY 2008 - 09 DATED 25.9.2010 AND MENTIONED THAT AN IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE A SSESSEE. IN THIS REGARD LD COUNSEL READ OUT THE RELEVANT PARAS 7 & 8 FROM THE SAID ORDER OF THE TRIBUNAL AND MENTIONED THAT CONSIDERING THE SIMILARITY OF THE FACTS AND THE GROUNDS RAISED BY THE REVENUE, THE MATTER MAY BE DECIDED IN FAVOUR OF THE ASSESSEE. FURTHER, LD COUNSEL HEAVILY RELIED ON THE ORDER OF THE CIT (A). 2 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL (SUPRA) DATED 25.9.2010, WHEREIN ONE OF US (AM) IS A PARTY. ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT PARAS 7 AND 8 ARE RELEVANT AND CONSIDERING ITS SIGNIFICANCE AND FOR THE COMPLETENESS OF THIS ORDER, THE SAME ARE REPRODUCED AS UNDER: 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE JUDGMENTS CITED BEFORE US. ON HEARING THE BOTH SIDES, WE FIND THAT THE SAID PARAS 4, 4.1 TO 4.5 OF THE CIT (A)S ORDER ARE RELEVANT HERE AND THE SAME READ AS UNDER: 4. I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. 4.1. THE BOMBAY HIGH COURT IN CIT VS. CHAPHALKAR BROTHERS , ITXA NO. 1036 OF 2010 (ORDER DATED JUNE, 8, 2011) CONSIDERED THE ISSUE OF SUBSIDY OF ENTERTAINMENT TAX BY GOVERNMENT OF MAHARASHTRA. IT WAS HELD THAT: - (I) A SUBSIDY IS A CAPITAL RECEIPT WHEN IT IS FOR THE PROMOTION OF NEW INDUSTRY, WHILE IT IS A REVENUE RECEIPT LIABLE TO TAX IF IT IS GRANTED TO SUPPLEMENT THE PROFITS OF AN INDUSTRY, (II) THE SUBSIDY GRANTED BY THE STATE GOVERNMENT OF MAHARASHTRA, IS FOR THE PROMOTION OF MULTIPLEXES, (III) THE SUBSIDY WAS GRANTED IN FORM OF A CONCESSION ON ENTERTAINMENT DUTY, (IV) THAT THE OBJECT BEHIND THE SUBSIDY WAS TO PROMOTE CONSTRUCTION OF NEW CINEMA HOUSES, (V) THE ST ATE GOVERNMENT HAD DECIDED TO GRANT THE SUBSIDY IN VIEW OF THE FACT THAT SETTING UP NEW MULTIPLEX COMPLEXES IS HIGHLY CAPITAL INTENSIVE, WITH A LONG GESTATION PERIOD. 4.2. THE BOMBAY HIGH COURT ON PONNI SUGARS (SUPRA), WHERE THE SUPREME COURT HAD EXPLAINED ITS PREVIOUS JUDGMENT IN SAHNEY STEEL AND PRESS WORKS LIMITED VS. CIT, 228 ITR 253 (SC) AS UNDER: THE IMPORTANCE OF THE JUDGMENT 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 JUDGING THE CHARACTER OF A SUBSIDY. THAT TEST IS THAT CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR 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 RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE M AIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR PAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS. ON THIS 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 OF 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. 4.3. THE BOMBAY HIGH COURT HELD THAT THE RATIO OF PONNI SUGARS (SUPRA) WAS THAT ONLY THE OBJECT OF THE SUBSIDY SCHEME MUST BE CONSIDERED AND THE F ACTS 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 FOR IN WHICH IT WAS GRANTED WAS NOT RELEVANT. THE BOMBAY HIGH COURT HELD: - THE FACT THA T 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 THEA TRES, THEN IRRESPECTIVE OF THE FACT THAT THE MULTIPLEX HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS, THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT . 4.5. FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT AS DISCUSSED ABOVE, GROUND NO. 1 & 2 ARE ALLOWED. GROUND NO. 3 IS GENERAL. 3 5. THE APPEAL IS ALLOWED. 8 . FROM THE ABOVE, WE FIND THAT THE CIT(A) EXAMINED THE APPLICABILITY OF THE BINDING JUDGMENTS TO THE FACTS OF THE CASE AND GRANTED RELIEF TO THE ASSESSEE. NO CONTRARY DECISION OF THAT K IND RELEVANT AND APP L ICABLE TO THE FACTS OF THE PRESENT CASE IS BROUGHT BY THE LD DR BEFORE US. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE. WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE CIT (A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED . 7. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AND ALSO FOLLOWING THE PRINCIPLE OF CONSISTENCY, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE UPHELD THE DECISION OF THE CIT (A) AND THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE DISMISSED . 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 1 T H DECEMBER, 2013. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 11 .12 .2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI