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

ITA 441/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80222 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T P KRISHNA KUMAR
• Keywords: Capital asset; Depreciation; Business expenditure; Source of fund; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 80IB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS: 272, & 273/AHD/2010 (ASSESSMENT YEAR: 2006-0 7 & 2007-08) M/S INOX LEISURE LTD 2 ND FLOOR ABS TOWER, OLD PADRA ROAD, BARODA 390007 V/S THE DCIT, CIRCLE-1(2), BARODA (APPELLANT) (RESPONDENT) ITA NO. 441 & 1097/AHD/2010 (ASSESSMENT YEAR: 2006-07 & 2007-08) THE DCIT, CIRCLE-1(2), BARODA V/S M/S INOX LEISURE LTD 2 ND FLOOR ABS TOWER, OLD PADRA ROAD, BARODA 390007 (APPELLANT) (RESPONDENT) PAN: AAACI 6063 J APPELLANT BY : SHRI S.N. SOPARKAR RESPONDENT BY : SHRI T.P. KRISHNAKUMAR, CIT D .R. ( )/ ORDER DATE OF HEARING : 01-07-2014 DATE OF PRONOUNCEMENT : 05 -08-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE 4 APPEALS OF WHICH TWO ARE FILED BY THE ASSES SEE AND THE OTHER TWO ARE FILED BY THE REVENUE ARE AGAINST THE ORDER OF C IT(A)-I, BARODA DATED 27.10.2009 & 30.12.2009 FOR A.YS. 2006-07 & 2007-08 RESPECTIVELY. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 2 2. BEFORE US, BOTH THE PARTIES SUBMITTED THAT THOUGH T HE APPEALS ARE OF DIFFERENT ASSESSMENT YEARS BUT MOST OF THE ISSUES A RE COMMON EXCEPT FOR THE AMOUNT AND YEAR AND THEREFORE THE SUBMISSION MA DE IN CASE OF ONE ASSESSMENT YEAR WOULD BE APPLICABLE TO THE OTHER AN D THAT BOTH THE APPEALS CAN BE HEARD TOGETHER. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS BY WAY OF A CONSOLIDATED ORDER FOR THE SAME OF CONVENIENCE. WE THUS PROCEED WITH THE FACTS FOR A.Y. 06-07. 3. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF OPERATING THE MULTIPLEXES ENTERTAINMENT COMPLEXES AND RELATED SERVICES. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 06-07 ON 20.12.2006 DECLARING TOTAL INCOME OF RS. 8,17,42,812/-. THE C ASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED 1 43(3) VIDE ORDER DATED 29.12.2008 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 9,67,67,330/-. AGGRIEVED BY THE ORDER OF A.O, ASSES SEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 27.10 .2009 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE OR DER OF CIT(A), ASSESSEE AND REVENUE BOTH ARE NOW IN APPEAL BEFORE US. WE NOW TAKE UP REVENUES APPEAL IN ITA NO. 441/AHD/ 2010 FOR A.Y. 2006-07. 5. THE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING ADDITION OF RS. 14,68,89,992/- ON ACCOUNT OF TREATING THE ENTERTAINMENT TAX AS REVENUE RECEIPT AS AGAINST THE CLAIM AS CAPITAL RECEIPT. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE INCENTIVE GIVEN TO T HE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATIONS AND IT IS GIVEN ONLY AFTER AND CONDITIONAL UPON THE COMMENCEMENT OF PRODUCTION IS TREATED AS REVENUE RECEIPT. 6. REVENUE HAS ALSO RAISED AN ADDITIONAL GROUND VIDE L ETTER DATED 13.12.2012 WHICH READS AS UNDER:- 1. WITHOUT PREJUDICE TO THE OTHER GROUND ALREADY TAKEN , THE LD.CIT(APPEALS) ALSO ERRED IN NOT APPRECIATING THE FACT THAT EVEN THOUGH THE ASSESSEE HAS CLAIMED THE ENTERTAINMENT TAX SUBSIDY AS CAPITAL RECEIPT DURING THE YEAR, IT HAS NOT REDUCED THE VALUE OF THE RECEIPT FROM THE COST OF ASSETS I N VIEW OF EXPLANATION X OF SECTION 43(1) OF THE INCOM E-TAX ACT. 7. SINCE ALL THE GROUNDS ARE RAISED BY REVENUE ARE INT ER RELATED, ALL THE GROUNDS ARE CONSIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD CLAIMED ENTERTAINMENT TAX WHICH WAS REFLECTED IN THE BOX OFFICE REVENUES IN RESPECT OF ITS MULTIPLEXES AT PUNE, BAR ODA, ELGIN ROAD, KOLKATTA AND SALT LAKE KOLKATTA, NARIMAN POINT, MUM BAI, GOA, INDORE AND JAIPUR AGGREGATING TO RS. 14,88,90,904/- AND WA S CLAIMED BY ASSESSEE AS CAPITAL RECEIPTS NOT CHARGEABLE TO TAX. A.O NOTICED THAT IN THE CASE OF ASSESSEES OWN CASE FOR A.Y. 03-04, 04-05 & 05-06 SIMILAR ISSUE WAS BEFORE A.O WHERE THE A.O RELYING ON THE RATIO O F DECISION IN THE CASE OF SAHNEY STEEL PRESS WORK LTD. VS. CIT 228 ITR 253 (SC) DID NOT AGREE WITH THE CONTENTION OF ASSESSEE. HE WAS THEREFORE O F THE VIEW THAT THE ENTERTAINMENT TAX EXEMPTION WAS GRANTED TO THE ASSE SSEE ONLY AFTER COMMENCEMENT OF COMMERCIAL OPERATIONS OF THE MULTIP LEXES AND THEREFORE THE RECEIPTS OF ENTERTAINMENT TAX WAS REV ENUE RECEIPTS. HE ACCORDINGLY DENIED THE CLAIM OF ASSESSEE AND HELD T O BE REVENUE IN NATURE AND CONSIDERED IT AS INCOME. AGGRIEVED BY TH E ORDER OF A.O, ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 4 ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) D ECIDED THE ISSUE BY HOLDING AS UNDER:- 5.THE THIRD GROUND OF APPEAL IS IN RESPECT OF INCLUSION IN THE TOTAL INCOME OF T HE AMOUNT OF ENTERTAINMENT TAX CLAIMED AS CAPITAL RECEIPT. THE F ACTS OF THE CASE ARE THAT THE ASSESSSEE HAD SEVEN MULTIPLEXES, WHICH WERE AVAILING ENTERTAINMENT TAX EXEMPTION DURING THE YEAR UNDER CONSIDERATION. THE MULTIPLEXES AT PUNE, BARODA, ELGIN ROAD (KOLKAT A) AND SALT LAKE (KOLKATA) WERE ESTABLISHED IN EARLIER YEARS. DURING THE YEAR THE COMPANY ESTABLIS HED THREE MULTIPLEXES, ONE EACH AT NARIMAN POINT (MUMBAI), VAIBHAV (JAIPUR) AND INDORE, IN RESPECT O F WHICH ENTERTAINMENT TAX EXEMPTION WAS AVAILED FOR THE FIRST TIME THIS YEAR. ENTERTAINMENT TAX EXE MPTION AVAILED BY THE COMPANY IN TERMS OF THE RESPECTIVE STATE POLICIES WAS CLAIMED BY THE ASSESS EE AS CAPITAL RECEIPT, WHICH WAS DENIED BY THE AO, RELYING UPON THE DECISION.OF THE SUPREME COURT IN T HE CASE OF SAHNEY STEEL PRESS WORKS LTD VS CIT, 228 ITR 253. 5. IN APPEAL, THE ID. AR CONTENDED THAT THE SAID AM OUNTS WERE IN THE NATURE OF CAPITAL RECEIPT, BEING INCENTIVE BY WAY OF EXEMPTION FROM ENTERTAINMENT TA X AND HENCE THEY WERE REQUIRED TO BE EXCLUDED WHILE COMPUTING THE TAXABLE INCOME. THE BREAK-UP OF AMOUNT IS AS UNDER: PUNE RS. 13,911,045 BARODA RS. 37,368,008 ELGIN RD (KOLKATA) RS. 30,992,010 SALT LAKE (KOLKATA) RS. 18,553,315 INDORE RS. 1,511,072 NARIMAN POINT(MUMBAI) RS. 44,460,613 JAIPUR, (VAIBHAV) RS. 2,094,912 TOTAL RS. 148,890,975 5.2 THE ID. AR RELIED ON THE DETAILED SUBMISSIONS M ADE IN THE COURSE OF APPEAL FOR EARLIER YEARS AND THE ORDERS OF CIT(A) FOR EARLIER YEARS. IT WAS PRAY ED THAT SINCE THE FACTS AND ISSUE ARE IDENTICAL, TH E DECISION IN THE APPEALS FOR EARLIER YEARS MAY BE FO LLOWED. 5.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. AR AND THE FACTS OF THE CASE. DECISIONS IN APPEAL IN CASE OF VARIOUS UNITS ESTABLISHED IN THE EARLIER YE ARS ARE SUMMARIZED BELOW: DEALT FOR THE FIRST TIME IN APPEAL FOR A.Y DECISION IN APPELLATE ORDER PUNE 2003-04 BARODA 2003-04 ELGIN RD 2004-05 SALT LAKE 2005-06 2005-06 HELD TO BE CAPITAL RECEIPT NOT EXIGIBLE TO TAX IN ALL APPELLATE ORDERS UP TO A.Y. 2005-06 IN THE CASE OF MULTIPLEXES AT PUNE, BARODA, ELGIN R OAD AND SALT LAKE, KOLKATTA THE ISSUE WAS CONSIDERED BY ME IN THE APPEALS FOR EARLIER YEARS I N WHICH I HAVE HELD THAT THE ENTERTAINMENT TAX SUBSIDY IN RESPECT OF MULTIPLEXES AT THE ABOVE-MENT IONED FOUR PLACES REPRESENTED CAPITAL RECEIPTS WHICH WERE NOT EXIGIBLE TO TAX, AND ACCORDINGLY THE AO WAS DIRECTED TO NOT INCLUDE THE SAME IN THE TAXABLE INCOME. THE FACTS AND ISSUE FOR CONSIDERATI ON IN RESPECT OF THESE FOUR MULTIPLEXES CONTINUE TO BE THE SAME IN THE CURRENT YEAR. HENCE, FOLLOWING M Y EARLIER ORDERS, IT IS HELD THAT THE ENTERTAINMENT TAX SUBSIDY IN RESPECT OF THESE FOUR UNITS REPRESEN T CAPITAL RECEIPTS. THE ADDITION OF THE AGGREGATE AMOUNT OF RS. 10,08,24,378/- IN RESPECT OF THESE FO UR UNITS IS, THEREFORE, DIRECTED TO BE DELETED. 5.4 IN RESPECT OF MULTIPLEX AT NARIMAN POINT, MUMBA I IT IS NOTEWORTHY THAT THE SAME SCHEME AS APPLICABLE TO THE MULTIPLEX AT PUNE APPLIES, SINCE BOTH THE MULTIPLEXES ARE SITUATED IN THE STATE OF MAHARASHTRA. THEREFORE, BASED ON MY ORDERS IN APPEA L FOR A.Y.2003-04 AND A.Y. 2004-05, THE ENTERTAINMENT TAX SUBSIDY IN RESPECT OF NARIMAN POI NT MULTIPLEX IS HELD TO ALSO REPRESENT CAPITAL RECEIPT WHICH IS NOT EXIGIBLE TO TAX. THE ADDITION OF RS. 4,44,60,613/- ON THIS ACCOUNT IS DIRECTED TO 6E DELETED. 5.5 REGARDING MULTIPLEX AT VAIBHAV, JAIPUR IT WAS SUBMITTED BY THE ID. AR THAT THE SUBSIDY HAS BEEN GRANTED BY THE FOLLOWING NOTIFICATIONS: ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 5 / [NO.F.4 (69) FD/TAX DIVISION/95-58, PUBLISHED I N RAJ. G GAZ EXL, PART IV (GA), DATED MARCH 15,1996. P.544] S.O.293 - IN EXERCISE OF THE POWERS CONFERRED BY SU B-SECTION (2) OF SECTION 7 OF THE RAJASTHAN ENTERTAINMENTS AND ADVERTISEMENTS TAX ACT, 1957 (RA J. ACTNO.24 OF 1957), THE STATE GOVERNMENT BEING OF THE OPINION THAT IT IS EXPEDIENT IN THE PU BLIC INTEREST SO TO DO, HEREBY 'EXEMPTS ENTERTAINME NT TAX (INCLUDING ADDITIONAL ENTERTAINMENT TAX) FOR A PERIOD OF FIVE YEARS, PAYABLE BY A NEW CINEMA HALL CONSTRUCTED SUBJECT TO THE CONDITION THAT COMMERCIA L EXHIBITION OF FILMS IN SUCH CINEMA HALL SHOULD START UP TO MARCH, 31, 2000. // NO.K4(L)FD/TAX-DIV./2000-308 DATED MARCH 3 0,2000 S.O. 383 - IN EXERCISE OF THE POWERS CONFERRED BY S UB-SECTION (2) OF THE SECTION & OF THE RAJASTHAN ENTERTAINMENTAND ADVERTISEMENT TAX ACT, 1957 (ACT N O 24 OF 1957),THE STATE GOVERNMENT HEREBY MAKES THE FOLLOWING AMENDMENT IN THIS DEPARTMENT NO TIFICATION NOF.4(69)FD/TAX-DIV/95-98 DATED 15- 3-199 6,NAMELY:- AMENDMENT IN THE SAID NOTIFICATION, THE EXISTING EXPRESSION 'UPTO MARCH 31,2000' SHALL BE SUBSTITUTED BY THE EXPRESSION 'UPTO MARCH 31,2002' 5.6 THE ABOVE NOTIFICATIONS HAVE BEEN ISSUED IN EXE RCISE OF POWERS CONFERRED BY SUB-SECTION (2) OF SECTION 7 OF THE RAJASTHAN ENTERTAINMENTS AND ADVER TISEMENTS TAX ACT, 1957 (RAJ. ACT NO.24 OF 1957) WHICH READS AS FOLLOWS:- 'WHENEVER, IN THE OPINION OF THE STATE GOVERNMENT R EASONABLE GROUNDS EXIST FOR DOING SO IN THE PUBLIC INTEREST, THE STATE GOVERNMENT MAY BY GENERAL OR SP ECIAL ORDER NOTIFIED IN THE OFFICIAL GAZETTE, REDUC E OR REMIT, WHETHER PROSPECTIVELY OR RETROSPECTIVELY, ENTERTAINMENT TAX WITH WHICH ANY ENTERTAINMENT OR CLASS OF ENTERTAINMENTS IS CHARGEABLE ' 5.7 IT WAS SUBMITTED BY THE ID. AR THAT SEC 7(2) OF RAJASTHAN ENTERTAINMENT TAX ACT 1957 EMPOWERS THE STATE GOVERNMENT TO REDUCE OR REMIT, WHETHER PR OSPECTIVELY OR RETROSPECTIVELY, ENTERTAINMENT TAX WITH WHICH ANY ENTERTAINMENT OR CLASS OF ENTERTAINM ENTS IS CHARGEABLE PROVIDED IT IS IN PUBLIC INTERES T TO DO SO, THE OBJECTIVE BEING PUBLIC INTEREST. IT W AS STATED THAT THE PHRASE 'IN PUBLIC INTEREST' AND ENCOURAGING SETTING UP OF MULTIPLEX CONVEY THE SAME MEANING BECAUSE EVEN ENCOURAGING THE SETTING UP OF MULTIPLEX IS BEING DONE BY GOVERNMENT FOR AN END OBJECTIVE OF WIDER PUBLIC INTEREST. IT WAS ALSO SUBMITTED THAT AS PER NOTIFICATION NO. S.O.293 DATE D 15 MARCH 1996, THE STATE GOVERNMENT RAJASTHAN HAS GRANTED EXEMPTION OF ENTERTAINMENT TAX SINCE IN ITS VIEW IT IS EXPEDIENT IN THE PUBLIC INTEREST TO DO SO. THOUGH THE SAID NOTIFICATION DOES NOT SPECIFY T HE SPECIFIC REASON FOR GRANTING SUCH EXEMPTION OTHE R THAN STATING THAT IT IS IN THE PUBLIC INTEREST, IT IS INTERESTING TO NOTE THAT THE PREVIOUS NOTIFICATI ON NO.F.9(6)FD/GR.-IV/86, DATED 27-6-1987 CLEARLY STAT ED THAT WITH THE OBJECT OF ENCOURAGING THE CONSTRUCTION OF NEW CINEMAS IN THE STATE, THE STATE GOVERNMENT IS OF THE OPINION THAT REASONABLE GROUNDS EXIST FOR DOING SO IN THE PUBLIC INTEREST A ND ACCORDINGLY NOTIFIED SCHEME FOR REMISSION OF ENTERTAINMENT TAX. SIMILARLY, SUBSEQUENTLY UNDER TH E RAJASTHAN INVESTMENT PROMOTION POLICY OF 2003, EXEMPTION OF ENTERTAINMENT TAX HAS BEEN INTRODUCED TO PROVIDE INVESTORS AN ATTRACTIVE OPPORTUNITY TO INVEST IN THE STATE OF RAJASTHAN. IT WAS SUBMITTED THAT ALL THE THREE SCHEMES OF THE RAJASTHAN GOVERNMENT ARE TO BE READ TOGETHER TO ASCERTAIN THE INTENTION OF THE GOVERNMENT OF RAJASTHAN. 5.8 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. AR AND THE FACTS OF THE CASE. THE ENTIRE ISSUE RELATI NG TO WHETHER RECEIPT OF SUBSIDY CONSTITUTES REVENUE O R CAPITAL RECEIPT HAS BEEN EXHAUSTIVELY DEALT WITH BY THE ITAT IN DCIT V. RELIANCE INDUSTRIES, 273 ITR 16 . THE TRIBUNAL ENCAPSULATED THE JUDICIAL POSITION WITH REGARD TO THIS ISSUE FOLLOWING THE RATIO OF TH E SUPREME COURT IN THE CASE OF SAHNEY STEEL (SUPRA) AND HELD THAT THE ULTIMATE DECISION WHETHER THE REC EIPT FALLS IN THE CAPITAL FIELD OR OUT OF IT WOULD DEPEND ON THE SALIENT FEATURES OF THE SCHEME. IF IT IS GIVEN AS A GENERAL ASSISTANCE TO THE ASSESSEE T O CARRY ON HIS BUSINESS OR TRADE, IT WOULD BE A TRADI NG RECEIPT, BUT IF THE OBJECT OF THE SUBSIDY, IRRESPECTIVE OF ITS SOURCE, IS TO ENABLE THE ASSESS EE TO ACQUIRE NEW PLANT AND MACHINERY FOR FURTHER EXPANSION OF ITS MANUFACTURING CAPACITY IN A BACKWA RD AREA, THE ENTIRE SUBSIDY MUST BE HELD TO BE A CAPITAL RECEIPT AND IT WILL NOT BE OPEN TO THE REVE NUE TO CONTEND THAT THE SUBSIDY PAID IN THE FORM OF REFUND OF SALES-TAX PAID ON RAW MATERIALS OR FINISH ED PRODUCTS MUST BE TREATED AS REVENUE RECEIPT. HOWEVER, IF THE MONIES ARE GIVEN TO THE ASSESSEE FO R ASSISTING HIM IN THE CARRYING ON OF THE BUSINESS OPERATIONS AND IT IS GIVEN ONLY AFTER AND CONDITION AL UPON THE COMMENCEMENT OF PRODUCTION, THEY MUST BE TREATED AS REVENUE RECEIPT. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 6 5.9 IN PONNI SUGARS & CHEMICALS LTD. & OTHERS , 219 CTR 105, THE SUPREME COURT LAID DOWN THE FOLLOWING PRINCIPLE:- 'TEST TO BE APPLIED FOR DETERMINING THE NATURE OF S UBSIDY IS PURPOSE TEST. IF THE OBJECT OF THE SUBSID Y SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINE SS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND IF THE OBJECT OF THE ASS ISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXIS TING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT. FORM OR THE MECHANISM THROUGH WHIC H THE SUBSIDY IS GIVEN IS IRRELEVANT. ' 5.10 THE INDORE BENCH OF THE ITAT CONSIDERED A SIMI LAR ISSUE IN THE CASE OF ITO VS SHREEJI CHITRA MANDIR, 97 ITD 66. IT WAS HELD THEREIN THAT SINCE T HE SUBSIDY WAS RECEIVED BY THE ASSESSEE AFTER COMPLETION OF CINEMA HOUSE AND COMMENCEMENT OF ITS OPERATION AND FURTHER SINCE THE SUBSIDY WAS NOT RELATED TO ANY ASSET OR CAPITAL OUTLAY, THE RECEIPT THEREOF WAS NOTHING BUT SUPPLEMENTARY TRADE RECEIP T, WHICH WAS EXIGIBLE TO TAX. 5.11 THE MADHYA PRADRESH HIGH COURT HAS ALSO CONSID ERED A SIMILAR CASE OF CINEMA HOUSE IN THE CASE SUNDARAM EXHIBITIONS (P) LTD VS CIT, 202 CTR 408, W HEREIN IT WAS HELD THAT ENTERTAINMENT TAX SUBSIDY, BEING A SUBSIDY GIVEN TO THE ASSESSEE BY T HE STATE GOVERNMENT NOT FOR ESTABLISHMENT OF CINEMA BUSINESS BUT FOR RUNNING THE BUSINESS AFTER ITS COM MENCEMENT, WAS A REVENUE RECEIPT EXIGIBLE TO TAX. I T WAS NOT MEANT TO BE USED PRIOR TO COMMENCEMENT OF C OMMERCIAL OPERATIONS SO AS TO MAKE THE SAME A CAPITAL RECEIPT. THE HIGH COURT FURTHER OBSERVED TH AT:- 'IF THE ASSESSEE IS GIVEN ANY SUBSIDY FOR RUNNING T HEIR BUSINESS, THEN SUCH SUBSIDY IS NEVER REGARDED AS CAPITAL BUT IT IS REGARDED AS REVENUE RECEIPT. IT I S THIS DISTINCTION THAT MUST BE KEPTIN CONSIDERATIO N WHILE DECIDING THE TRUE NATURE OF SUBSIDY. IN OTHER WORDS, EVERY SUBSIDY CANNOT BE REGARDED AS CAPITAL RECEIPT OR REVENUE RECEIPT. IN ORDER TO DECIDE ITS REAL CHARACTER, ONE IS REQUIRED TO EXAMINE THE SCHE ME, OBJECT AND ITS PURPOSE FOR WHICH IT IS GIVEN AND TH EN ONE CAN COME TO A CONCLUSION AS TO WHETHER IT IS A CAPITAL RECEIPT OR REVENUE RECEIPT. ' 5.12 FROM THE ABOVE, IT IS APPARENT THAT IN ORDER T O DETERMINE WHETHER THE RECEIPT OF A SUBSIDY LIES I N THE REVENUE OR CAPITAL FIELD, IT IS NECESSARY TO MA KE A REFERENCE TO THE SCHEME UNDER WHICH THE SUBSID Y IS GRANTED AND MORE PARTICULARLY THE PURPOSE FOR WH ICH IT IS GIVEN AND THE OBJECT WHICH IS SOUGHT TO B E ACHIEVED BY THE GRANT OF THE SUBSIDY. 5.13 IN THE CASE OF JAIPUR MULTIPLEX, THE ENTERTAIN MENT TAX SUBSIDY HAS BEEN GRANTED TO 'A NEW CINEMA HALL CONSTRUCTED SUBJECT TO THE CONDITION THAT COMM ERCIAL EXHIBITION OF FILMS IN SUCH CINEMA HALL WOUL D START UP TO MARCH, 2000.' HOWEVER, THE OBJECT OF TH E SCHEME OF SUBSIDY HAS NOT BEEN AMPLIFIED OR PARTICULARLY TARGETED AT NEWLY CONSTRUCTED CINEMA H ALLS. THE OBJECT OF THIS SCHEME HAS BEEN STATED IN VAGUE AMORPHOUS TERMS I.E., 'THE STATE GOVERNMENT B EING OF THE OPINION THAT IT IS EXPEDIENT IN THE PUBLIC INTEREST SO TO DO'. IN THIS CASE, THE DECISI ON OF THE INDORE BENCH OF THE ITAT IN ITO V SHREEJI CHITRA MANDIR, 97 ITD 66, WOULD BE APPLICABLE SINCE THE SUBSIDY HAS NOT BEEN RELATED TO ANY CAPITAL OUTLAY BUT HAS BEEN RELATED TO THE GENERAL OBJECTIV E OF 'PUBLIC INTEREST 5 '. ACCORDINGLY, IN MY OPINION, THE AO HAS CORRECTLY TREATED THE QUANTUM OF SUBSIDY AS SUPPLEMENTARY TRADE RECEIPT. THE DISALLOWANCE OF RS. 20,90,912/- IS ACCORDINGLY CONFIRMED. 5.14 IN RESPECT OF MULTIPLEX AT INDORE, THE ID. AR SUBMITTED THAT THE SUBSIDY WAS GRANTED VIDE NOTIFICATION NO. (38)-B-5-16-2000-CT-V DATED 25 TH OCTOBER 2001 ISSUED IN EXERCISE OF THE POWERS CONFERRED BY SECTION 7 OF THE MADHYA PRADESH ENTERT AINMENTS DUTY AND ADVERTISEMENTS TAX ACT, 1936 (NO. 30 OF 1936). SECTION 7 OF THE SAID ACT READS A S UNDER:- '7. THE STATE GOVERNMENT MAY, BY GENERAL OR SPECI AL ORDER EXCEPT - (I) ANY ENTERTAINMENT OR CLASS OF ENTERTAIN MENT FROM THE OPERATION OF SECTION 3; (II) ANY ADVERTISEMENT OR CLASS OF ADVERTISEMENTS FROM THE OPERATION OF SEC 3-A ' SECTION 3 REFERRED ABOVE IN SECTION 7 IS THE CHAR GING SECTION. 5.15 THE ID. AR. SUBMITTED THAT THE SUBJECT OF THE SCHEME READS 'THE GOVERNMENT POLICY IN RESPECT OF ESTABLISHMENT OF MULTIPLE CENTERS FOR FAMILY ENTERT AINMENT'. IF WE GO THROUGH THE SCHEME IT IS MORE OR LESS IN LINE WITH THE SCHEMES OF OTHER STATE GOV ERNMENTS LIKE GUJARAT, MAHARASHTRA AND WEST BENGAL. IT CLEARLY REFERS TO ESTABLISHMENT OF FAMIL Y ENTERTAINMENT CENTERS FOR THE CITIES OF BHOPAL, INDORE, GWALIOR AND JABALPUR. THE SUBSEQUENT SCHEME S ARE SPECIFICALLY NAMED AS 'THE MADHYA PRADESH KE CINEMAGHARON KE SUDHAR EVEM ADHUNKIKARAN KE LIYE PROTSAHAN YOJNA RULES 2003 & 2006'. THE NAME ITSELF INDICATES THE PURPOSE OF THE SCHEME. IT WAS ALSO SUBMITTED THAT THE POLICY OF T HE MADHYA PRADESH GOVERNMENT PROVIDES THAT THE AMOUNT OF EXEMPTION FROM ENTERTAINMENT DUTY DURING THE PERIOD OF FIVE YEARS SHALL NOT EXCEED THE CAPIT AL INVESTMENT MADE IN THE CONSTRUCTION OF THE SAID ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 7 MULTIPLEX COMPLEX WHICH FULLY CO-RELATES THE EXEMPT ION FROM ENTERTAINMENT TAX TO THE CAPITAL INVESTMENT. 5.16 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID . AR AND THE FACTS OF THE CASE. IN THE CASE OF INDO RE MULTIPLEX, THE SUBSIDY SCHEME CLEARLY REFERS TO THE OBJECT OF THE SCHEME AS 'ESTABLISHMENT OF MULTIPLE CENTRES FOR FAMILY ENTERTAINMENT'. THE RULES FRAMED FOR THE OPERATION OF THE SUBSIDY SCHEME ALSO REFER TO MODERNIZATION OF CINEMA HOUSES. MOREOVER, THE EX EMPTION FROM ENTERTAINMENT DUTY HAS BEEN LINKED TO THE CAPITAL INVESTMENT AND IS CAPPED AT 100% OF SUCH INVESTMENT. HENCE, IT WOULD APPEAR THAT THE SUBSIDY IN RESPECT OF INDORE MULTIPLEX WAS CLEARLY RELATABLE TO THE CAPITAL OUTLAY ON CONSTRUCTION OF THE MULTIPLEX COMPLEX. ACCORDINGLY, FOLLOWING THE DECIS ION IN PONNI SUGARS AND CHEMICALS, IT IS HELD THAT THE RECEIPT OF RS. 15,11,072/- IN RESPECT OF INDORE UNIT REPRESENTED A CAPITAL RECEIPT WHICH WAS NOT EXIGIBLE TO TAX. ACCORDINGLY, THE AO IS DIRECTED NO T TO INCLUDE THE SAME IN THE TAXABLE INCOME. 9. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, LD. D.R. SUBMITTED WRITTEN SUBMISSIONS, THE RELEVANT PARAS OF WHICH READS AS UNDER:- 6. WHAT COMES OUT IN THE THREE DECISIONS OF THE APEX C OURT IS THAT WHILE ENCOURAGEMENT OF AN INDUSTRY IS ALWAYS THE BASIS FOR GRANTING OF A SUBS IDY, IT MAY BE A CAPITAL SUBSIDY OR A REVENUE SUBSIDY BASED ON HOW THE SCHEME GRANTING THE SUBSID Y SEEKS TO ENCOURAGE THE INDUSTRY. SUCH ENCOURAGEMENT CAN BE BY EITHER OF TWO WAYS, '(A) BY SUBSIDIZING THE COST OF SETTING UP OF THE INDUSTRY OR (B) BY AIDING THE PROFITABILITY OF THE INDUSTRY. IN THE FORMER CASE, THE SUBSIDY WOULD BE CAPITAL IN NATURE AND IN THE LATTER CASE, IT WOULD BE REVENUE IN NATURE. 7. IT HAS THUS BEEN HELD THAT THE SUBSIDIES GIVEN FOR THE PURPOSE OF SETTING UP OF THE INDUSTRY BY SUBSIDIZING THE COST OF SETTING UP WERE CAPITAL IN NATURE AND THOSE SUBSIDIES GRANTED TO ENCOURAGE THE SETTING UP OF AN INDUSTRY BY MAKING THE BUSINES S (MORE PROFITABLE IS REVENUE IN NATURE. IN PONNI SUGARS CASE, WHICH IS THE LATEST DECISION THE SUBJECT AND HAS T AKEN INTO CONSIDERATION OTHER DECISIONS RENDERED THE BASIC TEST BE APPLIED IN JUD GING THE CHARACTER OF SUBSIDY AND HIGHLIGHTED AS UNDER WITH REFERENCE TO THE FACTS OF THE CASE (PARA 14): THAT THE TEST IS THAT THE CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY I S GIVEN. IN OTHER WORDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE UNDER POINT OF TIME AT WHICH THE SUBSIDY IS PA ID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATE RIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS. 8. IN PONNI SUGAR'S CASE, IT WAS FOUND THAT THE RECEIP TS OF SUBSIDY WAS CAPITAL IN NATURE ONLY ON ACCOUNT OF THE FACT THAT THE ASSESSEE WAS OBLIGED T O UTILIZE THE SUBSIDY ONLY FOR THE REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR SETTING UP OF NEW UNITS / EXPANSION OF EXISTING BUSINESS. 9. IN RESPECT OF THE UNITS SET UP NEWLY DURING THE YEA R, THE RECEIPTS IN RESPECT OF SUBSIDY FOR RAJASTHAN STATE, HAS BEEN HELD AS REVENUE RECEIPT BY THE CIT( A) AND SUBSIDY RECEIPTS IN RESPECT OF MADHYA PRADESH (INDORE UNIT) HAS BEEN HELD AS CAPITAL IN N ATURE BY THE CIT(A). THE PURPOSE TEST AS SET OUT IN PONNI SUGARS CASE, BY THE APEX COURT FAILS T O PROVE THAT THE SUBSIDY WAS INTENDED FOR MEETING ANY PART OF THE CAPITAL EXPENSES AS REVEALE D BY THE M.P. SCHEME. FURTHER POINTERS TO THE FACT THAT THESE SCHEMES ARE NOT CAPITAL SUBSIDY ARE SHOWN UP BY THE FACT THAT: (A) THESE SCHEMES WERE ALWAYS AFTER SETTING UP OF THE U NIT. (B) THEY WERE NOT ONE TIME PAYMENTS BUT RECURRING PAYME NTS THEREAFTER. (C) THE RECIPIENTS WERE FREE TO UTILIZE THE SUBSIDY AS THEY LIKED. (D) THE SUBSIDY SPRANG FROM THE BUSINESS AND IN THE COU RSE OF CARRYING ON THE BUSINESS AND LASTLY ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 8 (E) THE CAPIEAL INVESTMENT MENTIONED IN THE SCHEME WAS MERELY USED AS A BASIS FOR CALCULATION OF THE ENTITLEMENT OF SUBSIDY AND NOTHI NG FURTHER. 10. THESE ARE OTHER GUIDELINES SET BY THE VARIOUS DECIS IONS MENTIONED ABOVE, TESTS TO BE APPLIED WHEN THE PURPOSE TEST DOES NOT CLEARLY SHOW UP THE PURPO SE. ON ALL THESE POINTS, THE SUBSIDY RECEIVED BY THE ASSESSEE IN RESPECT OF MADHYA PRADESH AND RA JASTHAN STATES AND ALSO IN OTHER STATES, ARE SHOWN UP AS CAPITAL SUBSIDY. 11. THE GROUNDS OF LINKING BETWEEN THE SUBSIDY RECEIVED AND ITS CAPITAL NATURE AS PER EARLIER DECISIONS AS WELL AS IN THE UNIT IN M.P. IN CURRENT YEARS, AP ART FROM THE HEADING OF THE SCHEME, IS THAT THE SUBSIDY HAS BEEN COMPUTED AS A PERCENTAGE OF THE FI XED CAPITAL COST. TRUE NATURE OF THIS HAS BEEN HIGHLIGHTED IN P.J. CHEMICALS CASE BY THE APEX COURT, IN PARA 13: THE QUESTION IN THE PRESENT CONTEXT IS NOT WHETHER IF A PORTION OF THE COSTS IS MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY, IT SHO ULD BE DEDUCTED OR NOT. QUITE OBVIOUSLY, THE PLAIN MEANING OF THE SECTION IS THAT IT SHALL BE. B UT THE REAL QUESTION IS AS TO THE CHARACTER AND NATURE OF A SUBSIDY WHETHER IT WAS REALLY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL OR WAS NTENDED AS AN INCENTIVE TO ENCOURAGE NEW ENTREPRENE URS TO MOVE TO BACKWARD AREAS AND ESTABLISH INDUSTRIES, THE SPECIFIED PERCENTAGE OF THE FIXED C APITAL COST WHICH IS THE BASIS FOR DETERMINING THE SUBSIDY BEING ONLY A MEASURE ADOPTED UNDER THE SCHEME TO QUANTIFY THE FINANCIAL AID. 12. THIS BRINGS US TO THE QUESTION OF TREATMENT GIVEN B Y THE ASSESSEE IN ITS ACCOUNTS WHICH ALSO GIVES THE POINTER AS TO HOW THE SUBSIDY WAS UTILIZED, WHE THER FOR CAPITAL PURPOSES OR AS A REVENUE RECEIPT. IT CAN BE SEEN FROM THE SCHEMES ITSELF THA T UNLIKE IN THE CASE OF PONNI SUGARS, THERE WAS NO STIPULATION AS TO WHAT IS THE SPECIFIC MANNER IN WHICH THE SUBSIDY RECEIVED WERE TO BE USED. IN AN UNSIGNED WRITTEN SUBMISSION GIVEN BY THE ASSESSE E AT THE DIRECTION OF THE BENCH, IT HAS BEEN CLARIFIED THE RECEIPTS ARE TAKEN TO THE PROFIT & LO SS ACCOUNT. THUS, THE SUBSIDY ADDS TO THE PROFIT OF THE YEAR AND LEADS TO AIDING THE PROFITABILITY WHIC H IS THE MAIN CRITERIA FOR DETERMINING AS TO WHETHER THE SUBSIDY IS CAPITAL OR REVENUE. AS A MATTER OF FACT, IN THE F Y. RELEVANT TO THE A .Y. 2007- 08, THE ASSESSEE HAS PAID OUT DIVIDEND AT 10% WHICH ARISES PARTLY FROM THE APPROPRIATION OF THE ENTERTAINMENT TAX COLLECTED AND CLAIMED AS CAPITAL RECEIPTS. CLEARLY, THE SUBSIDY RECEIVED IS REVENUE IN NATURE. 13. IT MAY FURTHER BE STATED THAT THE SUBSIDIES HELD AS CAPITAL RECEIPTS BY THE FIRST APPELLATE AUTHORITY IN BOTH THE ASSESSMENT YEARS IN APPEAL, IN RELATION TO THE INDORE (M.P) MULTIPLEX HAS ALREADY BEEN HELD AS CAPITAL RECEIPTS BY THE DECISIONS OF THE JU RISDICTIONAL ITAT OF M.P. (INDORE) IN SHREEJEE CHITRA MANDIR CASE, (SUPRA) AND BY THE HIGH COURT OF M.P. IN SUNDARAM EXPORTS PVT. LTD CASE, (SUPRA). IN THE LIGHT OF THESE FACTS THE DECISIONS OF THE FIRST APPELLATE AUTHORITY IN RESPE CT OF INDORE MULTIPLEXES MAY BE VERSED. 14. FURTHER, THE ASSESSEE'S APPEALS FOR THE ABOVE YEARS IN RESPECT OF THE JAIPUR (RAJASTHAN) MULTIPLEX MAY BE TURNED DOWN, IN VIEW OF THE FACTS AND LEGAL POSITION BROUGHT OUT ABOVE. 15. AS REGARDS THE OTHER 2 STATES, I.E. MAHARASHTRA & G UJARAT ALREADY DECIDED EARLIER, THE PLEADINGS TAKEN BEFORE THE ITAT EARLIER IN ITA NOS.1984/ AND/ 2009, 2299/AHD/2009 AND 2300/ AHD/ 2009 ARE REITERATED. SINCE THE APPEAL IN EACH YEAR ARE DIFFERENT AND EARLIER YEARS APPEALS CANNOT BE BINDING AND CONSIDERING THE CONSOLIDATION OF THE LA W ON SUBSIDY ISSUE AS SUMMARIZED ABOVE, THE SUBSIDY RECEIPTS FOR MULTIPLEXES M THOSE STATES AS RELATING TO THE YEARS IN APPEAL NOW MAY BE HELD AS REVENUE IN NATURE OVERTURNING THE DECISION OF THE FIRST APPELLATE AUT HORITY. THIS STAND IS STRENGTHENED BY THE FACT THAT THE PRINCIPLE OF 'STA RE DECISIS' DOES NOT APPLY TO TAX LEGISLATION AS HAS BEEN HELD BY THE APEX COURT IN DISTRIBUTORS (BA RODA) P. LTD. V. CIT 155 ITR 120 (SC), WHEREIN THE COURT HELD: 'TO PERPETUATE AN ERROR IS NOT HEROISM. THE DOCTRIN E OF STARE DECISIS SHOULD NOT DETER THE COURT FROM OVERRULING AN EARLIER DECISION, IF IT IS SATISFIED THAT SUCH DECISION IS MANIFESTLY WRONG OR PROCEEDS UPON A MISTAKEN ASSUMPTION IN REGARD TO TH E EXISTENCE OR CONTINUANCE OF A STATUTORY PROVISION OR IS CONTRARY TO ANOTHER DECISION OF THE COURT.' IN CIT V. KALPETTA ESTATE LTD. 211 ITR 635 (KER), IT WAS FURT HER DECIDED BY THE KERALA HIGH COURT THAT A TRIBUNAL IS ENTITLED TO TAKE A DIFFERENT VIE W OF THE MATTER IF NEW MATERIALS WERE PLACED OR ON A CLOSER AND MORE INTELLIGENT ANALYSIS. HERE THE RE VIEW OF THE EARLIER DECISION WILL BE BASED ON CONCLUDED CRITERIA LAID DOWN BY THE APEX COURT. 16. THE ISSUE OF WEST BENGAL ENTERTAINMENT TAX RECEIPTS , WHETHER CAPITAL OR REVENUE HAS NOT BEEN ADJUDICATED SO FAR AND HENCE MAY BE ADJUDICATED NOW , IN THESE APPEALS. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 9 17. AS AN ALTERNATE GROUND, IT IS SUBMITTED THAT IF THE SUBSIDIES ARE HELD TO BE CAPITAL IN NATURE, THEN THE APPLICATION OF THE PROVISIONS U/S. 43(1) EXPLAN ATION X WITH RE FERENCE TO THE DEFINITION OF 'ACTUAL COST' MAY BE APPLIED AND THE VALUE OF THE A SSETS BE REDUCED ACCORDINGLY, TO THE EXTENT OF SUBSIDY RECEIVED AND THE DEPRECIATION TO BE GRANTED ONLY ON THAT BASIS. AS A MATTER OF FACT, THE APEX COURT IN THE P.J. CHEMICALS CASE CITED (SUPRA) WOULD SET THE BASIS FOR THIS, WHERE I T WAS HELD THAT IF SUBSIDIES ARE MEANT TO DIRECTLY OR INDIRECTLY MEET THE COST OF A CAPITAL ASSET, THEN ONLY CAN SUCH SUBSIDIES BE HELD TO BE CAPITAL SUBSIDIES. THE DECISION THAT THE SUBSIDIES IN THIS CASE IS CAPITAL SUBSIDIES WOULD LEAD TO THE CONSEQUENTIAL CONCLUSIO N THAT THE AMOUNT OF SUCH SUBSIDY HAS TO BE REDUCED FROM THE COST OF THE CAPITAL ASSET SP ECIFICALLY OR ON A PRO-RATA BASIS. THE ADDITIONAL GROUND RAISED BY THE REVENUE MAY BE DECIDED ACCORDI NGLY. THE DECISIONS IN CIT V. PALIWAL GLASS WORKS (2010) 326 ITR 407 (ALL) AND IN THE ALFA LAVAL INDIA LIMITED V. DCIT, PUNE, (2009) 116 ITD 186 (PUNE) ARE RELEVANT IN THE CONTEXT. 18. THE PLEADINGS IN RESPECT OF 80IB CLAIM OF THE ASSES SEE AS RAISED IN THE EARLIER YEARS ARE REITERATED. 11. LD. D.R. BEFORE US REITERATED HIS WRITTEN SUBMISSIO NS AND URGED THAT THE ORDER OF A.O BE UPHELD. LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE ENTERTAINMENT TAX CLAIMED AS CAPITAL RECEIPT IN CAS E OF MULTIPLEXES LOCATED AT PUNE, BARODA, KOLKATTA AND MUMBAI ARE AL READY HELD TO BE CAPITAL RECEIPTS BY THE HONBLE TRIBUNAL IN THE ASS ESSEES OWN CASE. HE FURTHER SUBMITTED THAT AGAINST THE ORDER OF HONBLE TRIBUNAL, REVENUE HAD PREFERRED APPEAL BEFORE HONBLE GUJARAT HIGH CO URT. THE HONBLE GUJARAT HIGH COURT IN TAX APPEAL NO. 167 TO 169 /A/ 2012 REPORTED IN 351 ITR 314 (GUJ) UPHELD THE ORDER OF TRIBUNAL. HE THUS SUBMITTED THAT THE ISSUE WITH RESPECT TO SUBSIDY FOR THE MULTIPLEX ES LOCATED AT PUNE, BARODA, KOLKATTA AND MUMBAI HAS ALREADY BEEN SETTLE D IN ASSESSEES FAVOUR AND HAS ATTAINED FINALITY AND THEREFORE NO I NTERFERENCE TO THE ORDER OF CIT(A) WITH RESPECT TO AMOUNT AT THE AFORESAID L OCATIONS IS CALLED FOR. WITH RESPECT TO THE SUBSIDY IN CASE OF MULTIPLEXES IN THE STATE OF RAJASTHAN, HE SUBMITTED THAT LD. CIT(A) RELYING ON THE GOVERNMENT NOTIFICATION S.O. NO. 293 DATED 15 TH MARCH, 1996 AND S.O. NO. 383 HAD DENIED THE DEDUCTION TO THE ASSESSEE. HE FURTHER SU BMITTED THAT THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SAMTA C HAVIGARH (SUPRA), AFTER CONSIDERING THE SAME GOVERNMENT NOTIFICATIONS WHICH WERE RELIED ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 10 BY CIT(A) FOR DENYING THE CLAIM OF ASSESSEE, HAS HE LD THE SUBSIDY PROVIDED BY THE GOVERNMENT TO BE CAPITAL RECEIPT. H E PLACED ON RECORD THE COPY OF THE AFORESAID DECISION AT PAGE 53 TO 59 OF THE PAPER BOOK AS REPORTED IN 2014 TAXMAN.COM. 337 (RAJASTHAN). HE TH EREFORE SUBMITTED THAT SINCE THE ISSUE HAS BEEN DECIDED BY A HIGH COU RT, THE MATTER IS COVERED IN ASSESSEES FAVOUR. WITH RESPECT TO THE SUBSIDY IN CASE OF INDORE MULTIPLEX HE SUBMITTED THAT THE SCHEME OF SU BSIDY WAS MORE OR LESS IN LINE WITH THE SCHEMES OF OTHER STATE GOVERN MENT LIKE GUJARAT, MAHARASHTRA AND WEST BENGAL. HE ALSO POINTED TO THE FINDINGS OF CIT(A) WITH RESPECT TO INDORE MULTIPLEX AND SUPPORTED HIS ORDER. WITH RESPECT TO THE ADDITIONAL GROUND AND ALTERNATE CONTENTION OF T HE REVENUE, WITH RESPECT TO THE REDUCING THE CAPITAL SUBSIDY FROM TH E COST OF ASSETS IN VIEW OF EXPLANATION 10 TO SECTION 43(1), HE SUBMITTED TH AT THE SUBSIDY AMOUNT CANNOT BE REDUCED FROM THE BLOCK OF ASSETS AND FOR WHICH HE RELIED ON THE DECISION OF THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF GODREJ AGROVET LTD. IN ITA NO. 1629/MUM/2009. HE PLACED ON RECORD THE COPY OF THE AFORESAID DECISION AT PAGE 57 TO 65 OF THE PAPER BO OK AND POINTED TO THE RELEVANT PARA AT PAGE 63 AND 64 OF THE PAPER BOOK. LD. A.R. SUBMITTED THAT HONBLE DELHI TRIBUNAL IN THE CASE OF PVR LTD. IN ITA NO. 1897/DELHI/2010 (ORDER DATED 20.04.2012) HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. HE POINTED TO THE RELEVANT FINDING S OF HONBLE TRIBUNAL AT PAGE 53 TO 55 OF THE PAPER BOOK. HE ALSO RELIED ON THE DECISION IN THE CASE OF CIT VS. ELLORA TIME PVT. LTD. IN TAX APPEAL NO. 1109/A/2010 ORDER DATED 16.08.2011 DECISION OF HONBLE GUJARAT HIGH COURT. HE THUS SUBMITTED THAT THE AMOUNT OF ENTERTAINMENT TAX RECE IVED BY THE ASSESSEE WAS CAPITAL IN NATURE AND THEREFORE NOT TAXABLE AND FURTHER THE SAME ALSO ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 11 COULD NOT BE REDUCED FROM THE BLOCK OF ASSETS FOR T HE PURPOSE OF CALCULATION OF DEPRECIATION. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO THE RECEIPTS OF ENTERTAINMENT TAX RECEIVED BY ASSESSEE IN MULTIPLEX ES LOCATED IN THE STATES OF MAHARASHTRA, GUJARAT, WEST BENGAL, MADHYA PRADESH AND RAJASTHAN WHICH IS CLAIMED BY ASSESSEE AS CAPITAL R ECEIPT AND THEREFORE NOT TAXABLE. WE FIND THAT THE ISSUE WITH RESPECT TO THE MULTIPLEXES IN THE STATE OF GUJARAT AND MAHARASHTRA WAS BEFORE THE CO- ORDINATE BENCH OF TRIBUNAL IN THE ASSESSEES OWN CASE IN A.Y. 03-04, 04-05 & 05-06 (IN ITA NO. 1984, 2299, 2300/AHD/2009 ORDER DATED 09.09 .2011). THE ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 8.2. AFTER THE DISCUSSION ABOUT THE NATURE OF THE S CHEME, IT HAS BEEN BROUGHT TO OUR NOTICE THAT IN RESPECT OF PUNE MULTIPLEX THE SUBSIDY WAS GRANTED BY AN AMENDMENT OF SECTION-3 OF BOMBAY ENTERTAINMENT DUTY ACT 1923 VIDE MAHARASHTRA ORDINA NCE NO.XXIV OF 2001 DATED 17/08/2001 IN RESPECT OF BOMBAY ENTERTAINMENTS DUTY (AMENDMENT) ORDINANCE, 2001. IN RESPECT OF VADODARA MULTIPLEX, THE SUBSIDY WAS GRANTED BY GOVERNMENT OF GUJARAT THROUGH NEW TOURISM POLICY 19 95 AS SPELT OUT BY RESOLUTION NO.NTP-1095/1983-C DATED 20 /12/1995. BOTH THE SCHEMES WERE IDENTICALLY WORDED AS EXPLAINED TO US AND THE VERY PURPOSE WAS TO PROMOTE THE CINEMA INDUSTRY. AS FAR AS THE COLLECTION OF THE ENTERTAINMENT DUTY AND ABOUT THE AMOUNT COLLECTED, THERE IS NO DISPU TE BETWEEN THE PARTIES APPEARING BEFORE US. THE ONLY DISPUTE IS THAT WHETHER THE SAID AMOUNT WHICH WAS COLLECTED AS A DUTY ON SALE OF TICKETS WAS IN THE N ATURE OF A 'CAPITAL RECEIPT' OR IN THE NATURE OF A 'REVENUE RECEIPT'. THE IDENTICAL MATTER HAD COME UP BEFORE THE ITAT PUNE BENCH IN THE CASE OF M/S.CHAPHALKAR BROTHERS VS. ITO ( ONE OF US I.E. J.M. IS THE AUTHOR) BEARING ITA NOS.1342 & 1342/PN/2006 FOR A.YS. 2003-04 & 2004-05 AND VIDE A N ORDER DATED 30/06/2009, THE NATURE OF CLAIM AND THE PURPOSE OF THE SCHEME WERE EXAMINED IN THE LIGHT OF FEW FOLLOWING CASE LAWS:- I. RUBY RUBBGER WORKS LTD. (178 ITR181) II. SADICHHA CHITRA (189 ITR 774) III. SAHNEY STEEL AND PRESS WORKS LTD. (228 ITR 253) IV. BALARAMPUR CHINI MILLS LTD. (238 ITR 445) V. PONNI SUGAR AND CHEMICALS LTD. (260 ITR 605) * VI. KANYAKUMARI DISTRICT CO-OPERATIVE SPINNING MILLS LT D. (264 ITR 684) VII. RELIANCE INDUSTRIES LTD. (273 I TR 16) VIII KALPANA PALACE (275 ITR 365) IX. R.B. NARAIN SINGH SUGAL MILLS LTD. (85 ITD 552) NB:-[ * THE LATEST CITATION IS CIT VS. PONNI SUGARS AND CHEMICALS LIMITED (2008) 306 IRR 392 (SC)] ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 12 8.3 THE TRIBUNAL HAS EXAMINED THE SCHEME AND THEN O PINED THAT IT WAS A BENEVOLENT SCHEME FOR THE BENEFIT TO THE EXHIBITORS/ MULTIPLEX OWNERS. THE SU BSIDY WAS MEANT TO GRANT ECONOMIC ASSISTANCE TO SET UP A MULTIPLEX. THE SUBSIDY WAS COLLECTED AS ENTERT AINMENT DUTY ON SALE OF TICKETS. IT WAS FOUND BY TH E TRIBUNAL THAT SUCH COLLECTION WAS NOT A TRADE RECEI PT OF THE ASSESSEE BECAUSE THE ENTERTAINMENT DUTY WAS COLLECTED ON BEHALF OF THE GOVERNMENT. IT WAS C OLLECTED UNDER A SPECIFIC DIRECTION AND IT WAS ALSO UTILIZED UNDER THOSE DIRECTIONS. THE SAID COLLECTIO N OF DUTY HAD NO NEXUS WITH THE DAY-TO-DAY FUNCTION OR RUNNING OF THE MULTIPLEX. THE COLLECTION OF THE DUTY WAS NOT WITH AN OBJECTIV E TO SUPPLEMENT THE TRADE RECEIPT. THE SUBSIDY WAS MEANT FOR THE RECOUP MENT OF A CAPITAL EXPENDITURE ALREADY INCURRED BY THE ASSESSEE. IT WAS HELD THAT THERE CAN BE TWO WAYS FO R THE DISBURSEMENT OF THE SUBSIDY, ONE THAT THE GOVERNMENT CAN GIVEN A CASH SUBSIDY OR IN THE ALTER NATE, SECOND, BY A SPECIFIC SCHEME CAN ALLOW A BENEFICIARY TO RETAIN ANY CESS OR DUTY COLLECTED ON BEHALF OF THE GOVERNMENT. DUE TO THIS REASON, THE MANNER THROUGH WHICH A DUTY IS COLLECTED IS OF NO C ONSEQUENCE. THEREAFTER, A CONCLUSION WAS DRAWN AS UNDER:- 'IN THE LIGHT OF THE ABOVE DISCUSSION WE CAN THEREF ORE SUMMARIZE OUR CONCLUSION THAT BROADLY SPEAKING THE SUBSIDY CAN BE OF TWO TYPES. (I) FOR THE PURPOSE OF HELPING THE GROWTH OF A N INDUSTRY (II) FOR THE PURPOSE OF SUPPLEMENTING THE PROFITS OF AN INDUSTRY. 10.1. TO ASCERTAIN WHETHER IN A PARTICULAR CASE THE SUBSIDY IN QUESTION FALL UNDER THE CATEGORY (I) OR (II); ONE HAS TO CAREFULLY EXAMINE THE FORM AS WELL AS SUBSTANCE OF THE IMPUGNED SCHEME. WE HAVE DONE THAT EXERCISE AND ON CLOSE EXAMINATION UNDISPUTEDLY IT WAS NOTICED THAT THE SCHEME IN QUESTION HAD FALLEN IN THE FIRST CATEGORY I.E. FOR THE PURPOSE O F HELPING THE GROWTH OF AN INDUSTRY. THOUGH THE COLLECTION WAS IN THE FORM OF AN ENTERTAINMENT DUTY VIA SALE OF TICKETS FOR A LIMITED PERIOD BUT ITS UTILIZATION WAS PREDETERMINED AND GRANTED WITH AN A SSURANCE TO COVER UP THE COST OF CONSTRUCTION. ONCE IT IS DEMONSTRATED BEFORE US THAT TOO UNDISPUT EDLY THAT IT WAS NOT ATTRIBUTED IN ANY MANNER TOWARDS SUPPLEMENTING OF DAY-TO-DAY EXPENDITURE OR IN THE FURTHERANCE OF THE PROFITS THEN IT CANNOT BE SAID TO BE IN THE CHARACTER OF A REVENUE RECEIPT. C ONTRARY TO THIS IT WAS IN THE NATURE OF A CAPITAL RECEIPT BEING AN INCENTIVE TO SUPPLEMENT THE CONSTR UCTION EXPENDITURE OF NEW SET UP OF MULTIPLEXES HENCE IN THE NATURE OF CAPITAL RECEIPT. TO ARRIVE A T THIS CONCLUSION WE DRAW SUPPORT FROM A PLETHORA O F DECISIONS, FEW OF THEM ALREADY CITED ABOVE. WITH TH E RESULT, WE DECIDE THE GROUND IN FAVOUR OF THE ASSESSEE. 8.4. THE SAID ORDER OF THE TRIBUNAL NOW STOOD CONFI RMED BY THE HON'BLE BOMBAY HIGH COURT AS CITED IN THE CASE OF M/S.CHAPHALKAR BROTHERS PUNE (SUPRA). THE HON'BLE COURT HAS SAID THAT THE SUBSIDY WAS FOR THE PROMOTION OF THE CONSTRUCTION OF MULTIP LEX THEATRES, HENCE IT WAS GRANTED ON CAPITAL ACCOUNT. THE HON'BLE COURT HAS ALSO CONFIRMED THAT THE SUBSIDY WAS NOT MEANT FOR REPAYING ANY LOAN TAKEN FOR CONSTRUCTION OF MULTIPLEXES. CONSIDERING THE OBJECT OF THE SCHEME, THE COURT HAS OPINED THAT THE SAME WAS TO PROMOTE CINEMA HOUSES TO CONSTRUCT MULTIPLEX THEATRES. IT WAS HELD THAT IRRESPECTIVE O F THE FACT THAT THE MULTIPLEXES HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. WE HAVE TO FOL LOW THIS VERDICT PRIMARILY DUE TO THE REASON THAT THE VERY SCHEME IN QUESTION, NOW BEFORE US, HAS BEE N CONSIDERED BY THE HONBLE COURT IN THIS JUDGEMENT. 8.5. AS FAR AS THE DECISION OF SUNDARAM EXHIBITIONS (P) LTD.(SUPRA) IS CONCERNED, AS CITED FROM THE SIDE OF THE REVENUE BY ID.CIT-DR, MR.GUPTA, WE HAVE THOROUGHLY EXAMINED OF THAT CASE. IT WAS FOUND BY THE HON'BLE COURT THAT QUOTE 'FROM A CAREFUL PER USAL OF THESE RULES, WE MAY DRAW AN INFERENCE THAT THE FINANCIAL ASSISTANCE WAS PROVIDED TO ENCOURAGE THE CINEMA OWNERS IN THIS LINE OF BUSINESS SO THAT THEY MAY CONSTRUCT ANOTHER CINEMA HOUSE, BUT IN THE INSTANT CASE, NO EFFORTS WERE MADE ON BEHALF OF TH E ASSESSES TO CONSTRUCT ANY OTHER CINEMA HOUSE AND HE HAS USED THE SUBSIDY RECEIVED FROM THE STATE GOVERNMENT IN ITS BUSINESS ENTIRELY.' UNQUOTE. THER EFORE, THE BASIC DISTINCTION WHICH WAS DRAWN BY THE HON'BLE M.P. HIGH COURT WAS THAT NO EFFORTS WERE MA DE BY THE ASSESSEE TO CONSTRUCT ANY OTHER CINEMA HOUSE AND THAT ASSESSEE HAD USED THE SUBSIDY FOR IT S BUSINESS. ON ACCOUNT OF THAT FACT, IT WAS CONCLUD ED THAT IN VIEW OF FOREGOING DISCUSSION, THE SUBSIDY R ECEIVED BY THAT ASSESSEE WAS HELD AS REVENUE IN NATURE HENCE EXIGIBLE TO TAX. 8.6. AS FAR AS THE DECISION OF SHREEJI CHITRA MANDIR (SUPRA) IS CONCER NED, AS CITED BY THE ID.DR MR.GUPTA, THE RESPECTED CO-ORDINATE BENCH INDORE HA S EXAMINED THE SCHEME. THE SUBSIDY WAS TO BE GIVEN IN INSTALLMENTS AS DETERMINED BY THE ADMINIST RATION. EACH ELIGIBLE CINEMA HOUSE WAS REQUIRED TO FILE APPLICATION IN PRESCRIBED FORM TO THE COLLECTO R. AFTER THE RECEIPT OF APPLICATION FROM THE OWNERS OF THE CINEMA HOUSES, THE COLLECTOR OF THE DISTRICT WI LL MAKE SUCH ENQUIRIES AS HE MAY CONSIDER IT ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 13 NECESSARY AND OBTAIN NECESSARY INFORMATION TO MAKE RECOMMENDATIONS TO THE COMMISSIONER OF EXCISE, WHO IN TURN WAS TO MAKE THE PAYMENT OF SUBSIDY UNDE R INTIMATION TO THE COLLECTOR. IT WAS ALSO FOUND BY THE TRIBUNAL THAT IF THE OWNERS OF THE CINEMA HOUSE S HAVE TAKEN LOAN FROM RASHTRIYA FILM DEVELOPMENT CORPORATION OR M.P.STATE FILM DEVELOPME NT CORPORATION, THEN THE SUBSIDY WOULD BE GIVEN THROUGH THEM. ON THAT FACTUAL FINDING, A DIST INCTION WAS DRAWN BY THE TRIBUNAL THAT THERE WAS A DIFFERENCE BETWEEN SUBSIDISING THE CAPITAL OUTLAY A ND SUBSIDISING THE RUNNING OF THE BUSINESS. A CLEAR - CUT FINDINGS WAS GIVEN THAT GRANT-IN-AID RECEIVED B Y THAT ASSESSEE WAS NOT RELATED TO ANY ASSET OR CAPITAL OUTLAY, IT WAS RECEIVED AFTER COMPLETION OF THE CINEMA HOUSE AND IT WAS TO ASSIST THE ASSESSEE TO RUN THE BUSINESS OF CINEMA HOUSE. IT WAS HELD THAT SUBSIDY WAS NOT GIVEN FOR CONSTRUCTION BUT THE PAYMENT OF SUBSIDY WAS NOTHING BUT SUPPLEMENTARY TR ADE RECEIPT. LD.DR HAS THEREFORE RELIED UPON THESE TWO DECISIONS, HOWEVER, WE HAVE NOTICED THAT THE FACTS WERE DISTINCT FROM THE FACTS FROM THE CAS E IN HAND, HENCE HEREBY HOLD THAT THESE TWO PRECEDENT S BEING DISTINGUISHABLE ON FACTS THEREFORE DO NOT APPLY ON THE FACTS OF THIS CASE. 8.7. WE HAVE EXAMINED THE TRUE NATURE OF THE 'SUBSI DY' IN THE HANDS OF THE ASSESSEE. HAVING REGARD TO THE NATURE OF SUBSIDY AND IN THE LIGHT OF THE ORDER OF THE HON'BLE BOMBAY HIGH COURT, WE HEREBY AFFIRM THE FINDING OF ID.CIT(A). MOREOVER, THE FACTS OF TH E CASE IN HAND IS AKIN TO THE FACTS OF M/S CHAPHALK AR BROTHERS ( SUPRA) THEREFORE HOLDS THE FIELD, CONSEQ UENTLY THIS ISSUE NOW STOOD SETTLED IN ASSESSEE'S FAVOUR BY THE HON'BLE BOMBAY HIGH COURT. WE DECIDE ACCORDINGLY AND THESE GROUNDS ARE DISMISSED. 13. BEFORE US, REVENUE HAS NOT BROUGHT ANY BINDING DECI SION OF JURISDICTIONAL HIGH COURT OR APEX COURT IN ITS SUPPORT. FURTHER, S INCE THE FACTS IN THE YEAR UNDER APPEAL IN THE CASE OF MULTIPLEXES LOCATE D IN THE STATE OF MAHARASHTRA AND GUJARAT ARE IDENTICAL TO THAT OF EA RLIER YEARS, WE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH AND FOR THE REASONS GIVEN BY THE CO-ORDINATE BENCH IN THE ASSES SEES OWN CASE FOR EARLIER YEARS, FIND NO REASON TO DIFFER WITH THE VI EWS OF THE CO-ORDINATE BENCH AND HOLD THE SUBSIDY TO BE CAPITAL IN RECEIPT S. 14. WITH RESPECT TO THE MULTIPLEXES LOCATED AT JAIPUR I N THE STATE OF RAJASTHAN, WE FIND THAT LD. CIT(A) AFTER CONSIDERIN G THE GOVERNMENT NOTIFICATIONS NO. 293 AND 383 (SUPRA) HAD DENIED TH E CLAIM OF ASSESSEE BUT HOWEVER, THE HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. SAMTA CHAVIGARH (2014) 44 TAXMANN. COM 337 (RAJ) AF TER REFERRING TO THE NOTIFICATION S.O. NO. 293 OF GOVERNMENT OF RAJASTH AN AND CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F PONNI SUGAR AND CHEMICALS LTD. AND THE DECISIONS OF OTHER HIGH COUR TS HELD AS UNDER:- ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 14 6. HAVING GIVEN THOUGHTFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND HAVING EXAMINED THE RECORD, WE FIND NOTHING OF ERROR OR ILLEGALITY ON THE PART OF THE APPELLATE AUTHORITIES IN ALLOWING THE QUESTIONE D AMOUNT AS CAPITAL SUBSIDY; AND WE ARE CLEARLY OF TH E VIEW THAT FORMULATED QUESTION DESERVES TO BE ANSWERED IN FAVOUR OF ASSESSEE. 7. IT IS NOTICED THAT IN THE SCHEME OF THE ACT OF 1 957, THE LEVY OF ENTERTAINMENT TAX IS PRESCRIBED IN SUB- SECTION (1) OF SECTION 4 THEREOF, WHICH IS ON PAYME NT FOR ADMISSION TO AN ENTERTAINMENT. THE SAID PROVISION READS AS UNDER: '4. LEVY OF TAX ON PAYMENT FOR ADMISSION.- (1) THER E SHALL BE LEVIED, CHARGED AND PAID TO THE STATE GOVERNMENT ON ALL PAYMENTS FOR ADMISSION TO AN ENTE RTAINMENT, A TAX AT SUCH RATE NOT EXCEEDING [100 PERCENT] OF THE PAYMENT FOR ADMISSION, AS MAY BE NO TIFIED BY THE STATE GOVERNMENT FROM TIME TO TIME, [SUBJECT TO A MINIMUM OF FIVE PAISE IN ANY ONE CASE , THE AMOUNT OF TAX WHEREVER NECESSARY SHALL BE ROUNDED OFF TO THE NEAREST MULTIPLE OF FIVE PAISE, FRACTIONS OF TWO AND HALF PAISE OR MORE BEING COUNT ED AS FIVE PAISE, AND LESS THAN TWO AND HALF PAISE BEI NG IGNORED.' THE MANNER OF PAYMENT OF TAX HAS BEEN SPECIFIED IN SECTION 5 OF THE ACT OF 1957, WHICH READS AS UNDER: '5. MANNER OF PAYMENT OF TAX. (1) SUBJECT TO OTHE R PROVISIONS OF THIS ACT, THE ENTERTAINMENT TAX SHA LL BE LEVIED IN RESPECT OF EACH PERSON ADMITTED ON PAY MENT AND SHALL BE CALCULATED AND PAID ON THE NUMBER OF ADMISSION. (2) THE ENTERTAINMENT TAX SHALL BE DUE AND RECOVERA BLE FROM THE PROPRIETOR. (3) THE PROPRIETOR SHALL SUBMIT SUCH RETURNS RELATI NG TO PAYMENTS FOR ADMISSION TO AN ENTERTAINMENT TO SUCH AUTHORITY, IN SUCH MANNER AND WITHIN SUCH PERI OD AS MAY BE PRESCRIBED.' 8. IT IS CLEAR THAT THE ENTERTAINMENT TAX IS TO BE PAID TO THE STATE GOVERNMENT, ON ALL PAYMENTS FOR ADMISSION TO AN ENTERTAINMENT AT THE PRESCRIBED RAT E; AND IS LEVIED IN RESPECT OF EACH PERSON ADMITTED ON PAYMENT AND IS TO BE COLLECTED AND PAID ON THE N UMBER OF ADMISSIONS. THE ENTERTAINMENT TAX IS DUE AND RECOVERABLE FROM THE PROPRIETOR, WHO IS ESSENTI ALLY THE OWNER OF THE PARTICULAR ENTERTAINMENT OR WHO MAY BE IN CHARGE OF THE MANAGEMENT, AS PER CLAU SE (8) OF SECTION 3 OF THE ACT OF 1957. 9. HOWEVER, UNDER SUB-SECTION (2) OF SECTION 7 OF T HE ACT OF 1957, ON BEING SATISFIED ABOUT EXISTENCE OF REASONABLE GROUND FOR DOING SO IN THE PUBLIC INTERE ST, THE STATE GOVERNMENT MAY, BY GENERAL OR SPECIAL ORDER NOTIFIED IN THE OFFICIAL GAZETTE, REDUCE OR R EMIT THE ENTERTAINMENT TAX WITH WHICH ANY ENTERTAINMENT OR CKSS OF ENTERTAINMENTS IS CHARGEAB LE. WHILE EXERCISING SUCH POWERS, THE STATE GOVERNMENT ISSUED THE EXEMPTION NOTIFICATION IN QUE STION ON 15.03.1996 IN SO NO. 293 THAT READS AS UNDER: S.O. 293.- IN EXERCISE OF THE POWERS CONFERRED BY SUB- SECTION (2) OF SECTION 7 OF THE RAJASTHAN ENTERTAINMENTS AND ADVERTISEMENTS TAX ACT, 1957 (RA JASTHAN ACT NO.24 OF 1957), THE STATE GOVERNMENT BEING OF THE OPINION THAT IT IS EXPEDIEN T IN THE PUBLIC INTEREST SO TO DO, HEREBY EXEMPTS ENTERTAINMENT TAX (INCLUDING ADDITIONAL ENTERTAINME NT TAX) FOR A PERIOD OF FIVE YEAR, PAYABLE BY A NEW CINEMA HALL CONSTRUCTED SUBJECT TO THE CONDITION TH AT COMMERCIAL EXHIBITION OF FILMS IN SUCH CINEMA HALL SHOULD START UPTO MARCH 31, 2000. 15 IN THE PRESENT CASE, IT IS MORE THAN APPARENT TH AT THE STATE GOVERNMENT PROCEEDED TO EXEMPT ENTERTAINMENT TAX FOR A PERIOD OF 5 YEARS PAYABLE B Y A 'NEW' CINEMA HALL CONSTRUCTED, SUBJECT TO THE CONDITION THAT COMMERCIAL EXHIBITION OF FILMS IN SU CH CINEMA HALL WAS REQUIRED TO BE STARTED BY 31.03.2000. IN THE SCHEME OF THE ACT OF 1957, WHERE ENTERTAINMENT TAX IS DETERMINED AND RECOVERABLE FROM THE PROPRIETOR OF THE ENTERTAINMENT AND IS LEV IED WITH REFERENCE TO THE NUMBER OF ADMISSIONS TO THE ENTERTAINMENT, WHEN THE STATE GOVERNMENT HAD EX EMPTED SUCH PROPRIETOR OF NEW CINEMA HALL FROM PAYMENT OF ENTERTAINMENT TAX ON THE GIVEN CONDITION , IN OUR VIEW, THE OBJECT WAS CLEARLY TO PROMOTE TH E CONSTRUCTION OF NEW CINEMA HALLS. MERELY BECAUSE TH E AMOUNT WAS NOT DIRECTLY MEANT FOR REPAYING THE AMOUNT TAKEN FOR CONSTRUCTION OF THE CINEMA HALL, I TS PURPOSE COULD NOT BE CONSIDERED TO BE OTHER THAN THAT OF PROMOTING CONSTRUCTION OF NEW CINEMA HALL. AS HELD CONSISTENTLY BY THE COURTS, THE SOURCE OF FUNDS FOR CONSTRUCTION OF SUCH CINEMA HALL IS IRREL EVANT; AND IT WOULD ALSO NOT MATTER IF THE GRANT WO ULD BE AVAILABLE AFTER THE BUSINESS HAS BEEN SET UP. 16. IN OUR VIEW, IN THE TOTALITY OF THE CIRCUMSTANC ES; AND PARTICULARLY LOOKING TO THE SCHEME OF THE A CT OF 1957 AS ALSO THE OBJECT AND PURPORT OF THE EXEMP TION NOTIFICATION, THE ASSISTANCE IN QUESTION CANNO T BE SAID TO BE AN OPERATIONAL SUBSIDY SO AS TO BE TA KEN AS A REVENUE RECEIPT. WE FIND CORRECT THE OBSERVATIONS BY ITAT THAT THE REMISSION HAD BEEN GR ANTED BY WAY OF INCENTIVE OF CAPITAL RECEIPTS IN TH E CONSTRUCTION OF CINEMA BUILDING. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 15 17. THE SUBMISSION THAT ONCE THE ASSESSEE HAS COLLE CTED THE ENTERTAINMENT TAX FROM THE PERSONS ADMITTED TO THE ENTERTAINMENT AND HAS NOT DEPOSITED THE SAME WITH THE GOVERNMENT, IT IS REQUIRED TO BE TREATED AS REVENUE RECEIPT REMAINS DEVOID OF SUBSTA NCE. THE REMISSION BY THE GOVERNMENT HAD BEEN TO THE PROPRIETOR OF THE ENTERTAINMENT AND NOT TO THE PERSON ADMITTED TO THE ENTERTAINMENT. THE REMISSION HAD BEEN THE METHODOLOGY ADOPTED BY THE STATE GOVER NMENT TO PROVIDE ASSISTANCE TO THE NEW CINEMA HALL; AND HAD BEEN ESSENTIALLY IN THE NATURE OF A S UBSIDY, LE., THE ASSISTANCE FROM THE GOVERNMENT TO THE NEW CINEMA HALL THE PRINCIPLES IN THE REFERRED DECISIONS OF THE HON'BLE SUPREME COURT, IN OUR VIEW, SUPPORT THE CONTENTION URGED ON BEHALF OF THE ASSESSEE: AND THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN KALPANA PALACE (SUPRA), WIT H WHICH WE RESPECTFULLY CONCUR, DIRECTLY APPLIES TO THE PRESENT CASE. 18. ACCORDINGLY, THE FORMULATED QUESTION IS ANSWERE D IN THE AFFIRMATIVE THAT THE TRIBUNAL WAS JUSTIFIE D IN AFFIRMING THE DELETION OF ADDITION OF RS.9,13,14 3/-, BEING THE AMOUNT OF ENTERTAINMENT TAX CAPITALI ZED AS SUBSIDY; AND THAT THE REFERRED DECISIONS DO NOT OPERATE AGAINST THE ASSESSEE. 15. THUS, RESPECTFULLY FOLLOWING THE DECISION OF HONBL E RAJASTHAN HIGH COURT CITED HEREINABOVE, WE HOLD THAT THE SUBSIDY I N RESPECT OF MULTIPLEX LOCATED AT JAIPUR TO BE CAPITAL IN NATURE. 16. WITH RESPECT TO THE MULTIPLEXES IN THE STATE OF MAD HYA PRADESH, WE FIND THAT THE CO-ORDINATE BENCH OF TRIBUNAL WHILE DECIDI NG THE CASE IN THE CASE OF ASSESSEE IN ITA NO. 1984, 2299 & 2300/AHD/2 009 (SUPRA) DISTINGUISHED THE DECISION IN THE CASE OF SHREEJI C HITRA MANDIR 97 ITR 77 INDORE BY NOTING AS UNDER: 8.6. AS FAR AS THE DECISION OF SHREEJI CHITRA MANDIR (SUPRA) IS CONCERNED, AS CITED BY THE LD.DR MR.GUPTA, THE RESPECTED CO-ORDINATE BENCH INDORE HA S EXAMINED THE SCHEME. THE SUBSIDY WAS TO BE GIVEN IN INSTALLMENTS AS DETERMINED BY THE ADMINIST RATION. EACH ELIGIBLE CINEMA HOUSE WAS REQUIRED TO FILE APPLICATION IN PRESCRIBED FORM TO THE COLLECTO R. AFTER THE RECEIPT OF APPLICATION FROM THE OWNERS OF THE CINEMA HOUSES, THE COLLECTOR OF THE DISTRICT WI LL MAKE SUCH ENQUIRIES AS HE MAY CONSIDER IT NECESSARY AND OBTAIN NECESSARY INFORMATION TO MAKE RECOMMENDATIONS TO THE COMMISSIONER OF EXCISE, WHO IN TURN WAS TO MAKE THE PAYMENT OF SUBSIDY UNDE R INTIMATION TO THE COLLECTOR. IT WAS ALSO FOUND BY THE TRIBUNAL THAT IF THE OWNERS OF THE CINEMA HOUSE S HAVE TAKEN LOAN FROM RASHTRIYA FILM DEVELOPMENT CORPORATION OR M.P.STATE FILM DEVELOPME NT CORPORATION, THEN THE SUBSIDY WOULD BE GIVEN THROUGH THEM. ON THAT FACTUAL FINDING, A DIST INCTION WAS DRAWN BY THE TRIBUNAL THAT THERE WAS A DIFFERENCE BETWEEN SUBSIDISING THE CAPITAL OUTLAY A ND SUBSIDISING THE RUNNING OF THE BUSINESS. A CLEAR - CUT FINDINGS WAS GIVEN THAT GRANT-IN-AID RECEIVED B Y THAT ASSESSEE WAS NOT RELATED TO ANY ASSET OR CAPITAL OUTLAY, IT WAS RECEIVED AFTER COMPLETION OF THE CINEMA HOUSE AND IT WAS TO ASSIST THE ASSESSEE TO RUN THE BUSINESS OF CINEMA HOUSE. IT WAS HELD THAT SUBSIDY WAS NOT GIVEN FOR CONSTRUCTION BUT THE PAYMENT OF SUBSIDY WAS NOTHING BUT SUPPLEMENTARY TRADE RECEIPT . LD.DR HAS THEREFORE RELIED UPON THESE TWO DECISIONS, HOWEVER, WE HAVE NOTICED THAT THE FACTS WERE DISTINCT FROM THE FACTS FROM THE CAS E IN HAND, HENCE HEREBY HOLD THAT THESE TWO PRECEDENT S BEING DISTINGUISHABLE ON FACTS THEREFORE DO NOT APPLY ON THE FACTS OF THIS CASE. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 16 17. THUS RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDI NATE BENCH OF TRIBUNAL CITED HEREINABOVE, WE HOLD THAT THE SUBSID Y IN RESPECT OF MULITPLEX LOCATED IN THE STATE OF M.P TO BE CAPITAL RECEIPTS. 18. WITH RESPECT TO THE ALTERNATE CONTENTION OF THE REV ENUE OF ADJUSTING THE SUBSIDY FROM THE BLOCK OF ASSETS, WE FIND THAT SIMI LAR ISSUE WAS BEFORE THE HONBLE DELHI TRIBUNAL IN THE CASE OF PVR LTD. VS. ACIT (ITA NO. 1897/DEL/2010 ORDER DATED 28.04.2012). THE ISSUE WA S DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF TRIBUNA L BY HOLDING AS UNDER:- 13.2. COMING TO THE NEXT GROUND ABOUT APPLICABILITY OF EXPLANATION 10 TO SEC. 43(1), ID. COUNSEL HAS RELIED ON HON'BLE SUPREME COURT JUDGMENT IN THE CAS E OF CIT VS. PJ. CHEMICALS LTD. (SUPRA) AND ITAT VISHAKHAPATNAM BENCH JUDGMENT IN THE CASE OF SASISR I EXTRACTIONS LTD. VS. ACIT (2008) 307 ITR (AT) 127. THE SCHEME OF THE U.P. GOVT. HAS BEEN SPELT OU T ABOVE. THE INCENTIVE DOES NOT REFER TO ACQUIRE ANY PARTICULAR ASSET; THE OBJECT AND PURPOSE OF THE SCHEME WAS TO PROMOTE THE CINEMA INDUSTRY BY PROMOTING THE CONSTRUCTION OF MULTIPLEXES TO WARD O F EFFECTS OF CABLE TELEVISION. 13.3. HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. PJ. CHEMICALS LTD. (SUPRA) HAS HELD THAT 'ACTUAL COST' SHOULD BE INTERPRETED IN A LIBERAL MA NNER. THE PURPOSE OF THE U.P. GOVT. BEING TO PROMOTE THE CINEMA INDUSTRY AS A WHOLE, ONLY BECAUS E THE BASIS FOR DETERMINING THE SUBSIDY IS CAPPED AT THE CAPITAL ASSETS, WILL NOT MEAN THAT HE SCHEME IS TO MEET THE COST OF ANY SPECIFIED ASSET DIRECTL Y OR INDIRECTLY. THEREFORE, THE AMOUNT OF SUCH SUBSIDY C ANNOT BE HELD TO REDUCE THE ACTUAL COST OF ASSET U/ S 43(1) EXPLANATION 10 OF THE ACT. 13.4. LD. DR HAS FILED WRITTEN SUBMISSION, WHICH WE HAVE REFERRED HEREINABOVE IN PARA LLE(II). WHILE ARGUING IT TO BE REVENUE SUBSIDY, HAS PLEADED THAT THERE WAS NO OBLIGATION ON ASSESSEE TO UTILIZE THE SUBSIDY IN ANY SPECIFIED MANNER. SIMILARLY, ID. CIT (APPEALS) ALSO WHILE HOLDING THE SUBSIDY TO BE REVENUE IN NATURE, HAS GIVEN A FINDING THAT THE SUB SIDY WAS NOT RELATABLE TO ANY SPECIFIC ASSET OF THE MULTIPLEX. 13.5. DEPARTMENT CANNOT APROBATE AND REPROBATE ON T HE SAME ISSUE. WHILE STRESSING THE SUBSIDY AS REVENUE IN NATURE BOTH ID. CIT(APPEALS) AND ID. CIT (DR) HAVE OFFERED A VIEW THAT SUBSIDY WAS NOT INTENDED TO BE UTILIZED IN SPECIFIED MANNER. THE VI EW MAKE IT CLEAR THAT THE SUBSIDY WAS NOT PROVIDED FOR MEETING THE COST OF ANY ASSET. 13.6. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT E. TAX SUBSIDY WAS NOT GIVEN TO MEET THE COST OF ANY SPECIFIC ASSET. OUR VIEW IS FURTHER FOR TIFIED BY THE COORDINATE BENCH JUDGMENT IN THE CASE OF SASISRI EXTRACTIO P. LTD. (SUPRA) IN WHICH CASE IN CENTIVE SUBSIDY RECEIVED FOR SETTING UP OF NEW UNIT FOR MANUFACTURE OF EDIBLE OILS WAS HELD TO BE NOT MEANT TO DIRECTLY OR INDIRECTLY REDUCE THE COST OF ANY ASSET, ONLY BECAUSE THE AMOUNT OF SUBSIDY WAS LINKE D WITH THE CAPITAL COST OF ASSETS. 13.7. IN VIEW OF HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA); ITAT VISHAKHAPATNAM BENCH JUDGMENT IN THE CASE OF SASISR I EXTRACTIONS LTD. (SUPRA) AND THE DEPARTMENT ITSELF PROPOSED THAT THERE WAS NO OBLIGATION ON ASS ESSEE TO UTILIZE IT FOR ANY SPECIFIC PURPOSE WILL N OT BE HIT BY EXPLANATION 10 TO SEC. 43(1). WE ARE, THEREF ORE, OF THE VIEW THAT ENTERTAINMENT SUBSIDY BEING F OR THE PROMOTION OF CINEMA/ MULTIPLEX INDUSTRY; ONLY B ECAUSE THE METHODOLOGY ADOPTED IS TO CAP IT TO CAPITAL COST OF ASSETS WILL NOT MEAN TO REDUCE THE COST OF ASSET DIRECTLY OR INDIRECTLY IN TERMS OF EXPLANATION 10 TO SEC. 43(1). THIS GROUND OF THE AS SESSEE IS ALLOWED. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 17 19. THE HONBLE BOMBAY TRIBUNAL IN THE CASE OF GODREJ A GROVET LTD. VS. ACIT( ITA NO. 1265/MUM/2009 ORDER DATED 17.09.2010) HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING AS UNDER:- 11 GROUND NO. 9 RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER: '9) BOTH THE LOWER AUTHORITIES ERRED IN REDUCING TH E WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS IN RESPECT OF CAPITAL SUBSIDY RECEIVED BY THE APPELLAN T FOR ITS POTHEPALLY UNIT (A.P). THE APPELLANT HAS FILED AN APPEAL TO THE TRIBUNAL IN ASSESSMENT YEAR 2003-04 AND SUBMITS THAT CONSEQUENTIAL EFFECT BE GIVEN IN THE CURRENT YEAR DEPENDING ON THE ULTIMATE DECISION OF THE TRIBUNAL IN THAT YEAR. 12 THE ISSUE RAISED IN GROUND NO. 9 THUS IS CONSEQUENT IAL TO THE DECISION OF THE TRIBUNAL IN A.Y. 2003- 04 WHICH AS POINTED OUT BY THE LEARNED COUNSEL HAS ALREADY BEEN RENDERED BY THE TRIBUNAL VIDE ITS ORDER DATED 10.09.2009 (SUPRA) IN PARA NO. 8 WHICH READS AS UNDER:- 'IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA), HON'BL E SUPREME COURT IN THE CONTEXT OF SECTION 43(1) OF THE ACT HAS HELD THAT IF A SUBSIDY IS GRANTED WI TH THE OBJECT OF INDUCING ENTREPRENEURS TO MOVE TO BACKWARD AREA AND ESTABLISH INDUSTRY AND WHERE SUBS IDY IS GRANTED AS PERCENTAGE OF FIXED CAPITAL COST TAKEN AS BASIS FOR DETERMINING THE SUBSIDY, TH AT WOULD ONLY BE A MEASURE ADOPTED UNDER THE SCHEME TO QUANTITY SUBSIDY. THE COURT THEREFORE HEL D THAT IT WAS NOT A PAYMENT DIRECTLY OR INDIRECTLY TO MET ANY PORTION OF THE ACTUAL COST. L ANGUAGE OF EXPLANATION 10 TO SECTION 43(1) IS ALSO IDENTICAL; AND THEREFORE BY VIRTUE OF INSERTIO N OF EXPLANATION 10, IT CANNOT BE SAID THAT DECISION IN THE CASE OF P.J. CHEMICALS (SUPRA) HAS BEEN SUPERSEDED BY AMENDMENT IN LAW. THIS IS THE REASONING ADOPTED BY VISHAKHAPATNAM BENCH OF IT AT. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE AMOUNT OF SUBSIDY CANNOT BE REDUCED F ROM THE BLOCK OF ASSET FOR COMPUTING DEPRECIATION. WITH REGARD TO THE ARGUMENTS OF LEARN ED DEPARTMENTAL REPRESENTATIVE THAT PROVISO TO EXPLANATION 10 MAKES IT CLEAR THAT IRRESPECTIVE OF THE NATURE OF THE SUBSIDY, AMOUNT OF SUBSIDY HAS TO BE REDUCED FROM THE ACTUAL COST OF CAPITAL A SSET, WE ARE OF THE VIEW THAT THE SAME IS APPLICABLE IN A CASE WHERE SUBSIDY IS GRANTED WITH AN INTENTION TO SUBSIDIZE THE COST OF THE CAPITAL IN THE FORM OF CAPITAL ASSET AND WHERE SOME OF CAPI TAL ASSETS ARE DEPRECIABLE ASSET AND SOME ARE NOT CAPITAL ASSET ON WHICH DEPRECIATION CAN BE ALLO WED. IT IS ONLY IN SUCH SITUATION THAT APPORTIONMENT HAS TO BE MADE TO THE COST OF DEPRECI ABLE ASSET. FOR THE REASONS STATED ABOVE, WE ALLOW GROUND NO. 1 RAISED BY THE ASSESSEE.' 13THE TRIBUNAL THUS HAS HELD THAT THE SUBSIDY OF RS 20 LACS RECEIVED BY THE ASSESSEE COULD NOT BE REDUCED FROM THE VALUE OF BLOCK ASSETS FOR COMPUTIN G DEPRECIATION. WE, THEREFORE ALLOW THIS GROUND OF THE ASSESSEE'S APPEAL AND DIRECT THE A.O. TO RE-COMPUTE THE DEPRECIATION ACCORDINGLY. 20. WE ALSO FIND THAT THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ELLORA TIME PVT. LTD. TAX APPEAL NO. 1101/A/2010 OR DER DATED 16.08.2011 UPHELD THE ORDER OF THE TRIBUNAL IN HOLD ING THAT THE SUBSIDY RECEIVED BY THE ASSESSEE CANNOT BE RECEIVED FROM TH E WRITTEN DOWN VALUE FOR THE PURPOSE OF COMPUTING DEPRECIATION. RESPECTF ULLY FOLLOWING THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE ALTERNATE CONTENTION OF THE REVENUE OF REDUCING THE AMOUNT OF SUBSIDY FROM THE BLOCK OF ASSETS CANNOT BE ACCEPTED. THUS T HIS GROUND OF REVENUE IS DISMISSED. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 18 21. WE NOW TAKE UP ASSESSEES APPEAL. THE EFFECTIVE GRO UNDS RAISED BY ASSESSEE READS AS UNDER:- 1. IN CONFIRMING THE DISALLOWANCE OF RS. 4,48,817/- IN RESPECT OF ABANDONED PROJECTS ANDHERI, MUMBAI 2. IN CONFIRMING THE NON-ALLOWANCE OF DEDUCTION RS. 20 ,90,912/- BEING INCENTIVE BY WAY OF EXEMPTION FROM ENTERTAINMENT TAX IN RESPECT OF MULTIPLEX AT V AIBHAV, JAIPUR. HE OUGHT TO HAVE TREATED IT AS CAPITAL RECEIPT NOT FORMING PART OF TOTAL INCOME AN D THE OUGHT TO HAVE DIRECTED TO ALLOW AS DEDUCTION WHILE COMPUTING TAXABLE INCOME. GROUND NO. 1 IS WITH RESPECT TO DISALLOWANCE OF EXP ENSES IN RESPECT OF ABANDONED PROJECT. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD INCURRED EXPENDITURE OF RS. 4,48,817/- DURING T HE YEAR IN RESPECT OF ARCHITECTS FEES FOR EXPLORING THE POSSIBILITY OF SE TTING UP A MULTIPLES AT MUMBAI WHICH PROJECT WAS LATER ABANDONED. A.O WAS O F THE VIEW THAT SETTING UP A NEW PROJECT WAS IN THE CAPITAL FIELD A ND NOT IN THAT OF REVENUE. HE ACCORDINGLY DISALLOWED THE EXPENDITURE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) FOLLOWING THE DECISION IN ASSESSEES CASE FOR A.Y. 04-05 & 05-06, UPHELD THE ORDER OF A.O AND DISMISSED THE CLAIM OF ASSESSE E. 23. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. BEFORE US, THE LD. A.R. SUBMITTED THAT IDENTICAL IS SUE IN THE CASE OF ASSESSEE WAS BEFORE HONBLE TRIBUNAL FOR A.Y. 04-05 & 05-06. HONBLE TRIBUNAL VIDE ORDER DATED 09.09.2011 HAS DECIDED TH E ISSUE IN FAVOUR OF ASSESSEE. HE THEREFORE SUBMITTED THAT SINCE THE FAC TS OF THE CASE IN THE YEAR ARE IDENTICAL TO THAT OF EARLIER YEAR, THE EXP ENSES BE ALLOWED. LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF A.O A ND CIT(A). ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 19 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT FOR EARLIER YEARS IN ITA NO. 1984/AHD/ 2009 IDENTICAL ISSUE WAS BEFORE THE CO-ORDINATE BENCH OF TRIBUNAL AND TH E SAME WAS DECIDED IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- 27. WE HAVE HEARD BOTH THE SIDES. FOR A.Y. 2004-05, AN EXPENDITURE OF RS.21,32,001/- WAS IN RESPECT OF THE PROJECT AT GURGAON, HOWEVER, THAT PROJECT WAS A BANDONED. THE AO HAS MENTIONED THAT ON EXAMINATION OF THE NATURE OF EXPENDITURE IT WAS FOU ND THAT THE SAME WAS IN RESPECT OF .PROJECT REPORT, ADVISORY CONSULTATION, COST FOR TRAVEL AND OTHER RE LATED ACTIVITIES. FOR A.Y. 2005-06, EXPENDITURE INCURRED WAS RS.22,69,624/-IN RESPECT OF A PROJECT AT ANDHERI, BOMBAY AND A SUM OF RS.54,904/- INCURED FOR A PROJECT AT ALLAHABAD. BOTH THE PROJEC TS WERE ABANDONED. FOR BOTH THE YEARS, THE ASSESSEE HAS NOT CLAIMED THE EXPENDITURE IN ITS COMPUTATION OF INCOME BUT MADE A CLAIM THROUGH NOTES ANNEXED TO THE COMPUTATION OF INCOME. THE NATURE OF EXPENDITURE WAS ALIKE FOR BOTH THE YE ARS, I.E. EXPENDITURE ON PROJECT REPORT, CONSULTATION, COST OF TRAVEL AND OTHER RELATED ACTIVITIES. FROM THESE FACTS, IT IS CLEAR THAT THE ASSESSEE, IN FACT, WANTED TO PURSUE THE LI KE NATURE BUSINESS ALREADY IN EXISTENCE, I.E. RUNNI NG OF A MULTIPLEX AND EXHIBITION OF CINEMATIC FILMS. IT I S ALSO EVIDENT, AS NOTED BY THE AO, THAT THE EXPENDITURE WAS TOWARDS TECHNICAL REPORTS AND FINAN CIAL FEASIBILITY OF THE PROJECT AND THOSE PROJECT REPORTS WERE OBTAINED FROM THE EXPERTS. FROM THE SI DE OF THE REVENUE, THOSE EXPENDITURE WERE ON CAPITAL FIELD AND THEREFORE REQUIRED TO BE CAPITALI ZED AS PRE-OPERATIVE EXPENDITURE IN RESPECT OF THOS E PROJECTS. THEREFORE, REVENUE HAS HELD THAT IT WAS A CAPITAL EXPENDITURE BEING PART OF THE COST OF THE PROJECT. REVENUE HAS ALSO PLACED RELIANCE ON E.I.D. PARRY (I NDIA) LTD.[SUPRA]. ON CAREFUL READING, WE HAVE FOUND THAT THE ASSESSEE IN THAT CASE WANTED TO SET UP A NEW PROJECT FOR THE MANUFACTURE OF 'MENTHOL AT ENNORE'. THE EXPENDITURE WAS INCURRED AS ENGINEERIN G FEE, TRAVEL EXPENSES, INTEREST, SALARY FOR EMPLOYEES WORKING IN THE PROJECT, LEGAL FEES, ETC. FOR THE PERIOD FROM 1975 TO 1978. HOWEVER, THE ASSESSEE SOUGHT THE CLAIM AS DEDUCTIBLE EXPENDITURE FOR THE ASSESSMENT YEAR IN QUESTION, I.E. A.Y. 198 1- 82. IT IS ALSO NOTICED BY THE HON'BLE COURT THAT TH E EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SETTING UP A 'NEW PROJECT'. IT HAS ALSO BEEN NOTED BY THE HON'BLE COURT THAT TH E EXPENDITURE HAD BEEN INCURRED IN THE YEARS PRIOR TO THE ASSESSMENT YEAR IN QUESTION. AFTER RECORDING THOSE FINDINGS ON FACT , IT WAS HELD THAT BY THE SUBSEQUENT EVENT OF CLOSURE OF THE PROJECT; IT DID NOT CONVERT AN EXPENDITURE IN THE NATURE OF CAPITAL INTO A REVENUE EXPENDITURE. THE E XPENDITURE WAS SETTING UP OF A 'NEW PROJECT' WHICH WAS CLEARLY IN THE CAPITAL FIELD. AN OBSERVAT ION OF THE QUOTE IS WORTH REPRODUCTION :- 'THE EXPENDITURE INCURRED ON THAT CAPITAL PROJECT WAS NOT SOMETHING WHICH COULD BE REGARDED AS REVENUE EXPENDITURE LAID OUT EXCLUSIVELY AND WHOLLY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE AS WHAT THE ASSESSEE WAS TRYING TO START WAS A NEW BUS INESS FOR THE MANUFACTURE OF A NEW PROJECT. THE EXPENDITURE INCURRED THEREIN WAS CLEARLY CAPITAL EX PENDITURE AND NOT REVENUE EXPENDITURE.' 27.1. THEREFORE, THE DISTINCTION IS THAT IN THE ABO VE CITED PRECEDENT, THE ASSESSEE WAS SETTING UP A N EW PROJECT FOR THE PURPOSE OF MANUFACTURING OF A NEW P RODUCT. ON THE OTHER HAND, IN THE PRESENT APPEAL, NOW BEFORE US, THE ASSESSEE IS RUNNING A MULTIPLEX CINEMA THEATRE AND THE EXPENDITURE WAS IN RESPECT OF A NEW PROJECT FOR THE SAME LINE OF BUSINESS OF R UNNING OF MULTIPLEX AND CINEMA THEATRE. UNDISPUTEDLY, THE EXPENDITURE WAS TOWARDS PROJECT R EPORT AND CONSULTATION FEES, ETC. ON IDENTICAL FACT S IN THE CASE OF CIT VS. PRIYA VILLAGE ROADSHOWS LTD, (SUPRA), THE HON'BLE DELHI HIGH COUR T HAS HELD AS UNDER:- 'THE ASSESSEE WAS INVOLVED IN THE BUSINESS OF RUNNI NG CINEMAS. THERE WAS A PROPOSAL BEFORE THE ASSESSEE TO TAKE OVER A CINEMA THEATRE FOR CONVERSI ON INTO A MULTIPLEX AND OPERATION AND MANAGEMENT THEREOF. THE ASSESSEE AVAILED OF THE SER VICES OF AN ARCHITECT AND PAID HIM RS. 2,05,000 AS FEE. HOWEVER IT WAS FOUND THAT THE PROJ ECT WAS NOT FINANCIALLY AND TECHNICALLY VIABLE AND HENCE THE ASSESSEE DROPPED THE PROJECT. LIKEWIS E, THERE WAS A PROPOSAL TO TAKE OVER A CINEMA THEATRE FOR THE PURPOSE OF CONVERSION INTO A FOUR-S CREEN CINEMA COMPLEX. DETAILED TECHNICAL AND FINANCIAL FEASIBILITY WAS CARRIED OUT AND BUILDING PLANS WERE PREPARED BY A CONSULTANCY GROUP. IN ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 20 THIS CONNECTION THE ASSESSEE INCURRED AN EXPENDITUR E OF RS. 12,39,239. ON SUBSEQUENT MARKET RESEARCH THE ASSESSEE PREFERRED TO RETAIN THE SINGL E-SCREEN CINEMA AND THE PROPOSAL OF CONVERSION OF THE CINEMA INTO A MULTIPLEX WAS SHELVED. THE ASS ESSEE CLAIMED THE EXPENSES AS REVENUE EXPENDITURE. THE REVENUE HELD IT TO BE A CAPITAL EX PENDITURE ON THE GROUND THAT THE EXPENSES WERE INCURRED FOR CREATING A NEW ASSET. HOWEVER, THE TRI BUNAL ALLOWED THE EXPENSES AS BUSINESS EXPENDITURE UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE FEASIBILITY S TUDIES CONDUCTED BY THE ASSESSEE WERE FOR THE SAME AND EXISTING BUSINESS WITH A COMMON ADMINISTRA TION AND COMMON FUND AND THE STUDIES WERE ABANDONED WITHOUT CREATING ANY NEW ASSET. THEREFORE , THE EXPENSES WERE OF REVENUE NATURE.' 27.2. IN OUR OPINION, THE ISSUE IN HAND IS THEREFOR E DIRECTLY COVERED BY THE AFOREMENTIONED ORDER OF T HE HON'BLE DELHI HIGH COURT, WHEREIN THE ASSESSEE WAS ALSO INVOLVED IN THE BUSINESS OF RUNNING CINEMAS. IN THE RESULT, WE HEREBY REVERSE THE FINDINGS OF TH E AUTHORITIES BELOW AND DIRECT THE REVENUE AUTHORIT IES TO ALLOW THE CLAIM. THUS, THIS GROUND IS ALLOWED IN BOTH THE YEARS. 25. BEFORE US, REVENUE COULD NOT BRING ANY MATERIAL TO DISTINGUISH THE FACTS WITH THAT OF EARLIER YEARS NOR HAS BROUGHT ANY BIND ING DECISION IN ITS SUPPORT. WE THEREFORE FOLLOWING THE DECISION OF CO- ORDINATE BENCH AND FOR THE REASONS HELD BY IT, HOLD THAT THE EXPENSES TO BE ALLOWABLE. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 26. GROUND NO. 2 OF ASSESSEES APPEAL IS CONNECTED WITH THE GROUNDS RAISED BY REVENUE IN ITS APPEAL NO. 441/AHD/2010 FOR A.Y. 06-07. WE WHILE DECIDING THE REVENUES APPEAL HEREINABOVE, HAVE DIS MISSED THE APPEAL OF THE REVENUE. FOR THE SAME REASONS STATED THEREIN, T HE GROUND OF ASSESSEE IS ALLOWED. THUS THIS GROUND OF ASSESSEE IS ALLOWED . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. REVENUES APPEAL FOR A.Y. 07-08 27. THE GROUND RAISED BY REVENUE READS AS UNDER:- L(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN RESTRICTING THE ADDITION ON ACCOUNT OF TREATING THE ENTERTAINMENT TAX AS REVENUE RECEIPT AS AGAINST TH E CLAIM AS CAPITAL RECEIPT FROM RS.19,21,88,772/- TO RS.2,44,25,134/-. L(B). THE LD.CIT(APPEALS) FAILED TO APPRECIATE THAT THE SUBSIDY RECEIVED BY THE ASSESSEE AFTER COMPLETION OF CINEMA HOUSE AND COMMENCEMENT OF OPER ATION IS CLEARLY A REVENUE RECEIPT EXIGIBLE TO TAX, AS HELD BY THE INDORE BENCH AOF ITAT IN THE CA SE OF ITO VS SHREEJI CHITRA MANDIR, 97 ITD 77 AND M .P. HIGH COURT IN THE CASE OF SUNDRARAM EXHIBITIO NS (P) LTD. 202 CTR 408. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 21 2(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.80IB AS CLAIMED BY THE ASSESSEE COMPANY. 2(B). THE ID.CIT(APPEALS) FAILED TO APPRECIATE THAT THE DECISION OF THE ASSESSING OFFICER REJECTING TH E CLAIM OF DEDUCTION U/S.80IB WAS BASED ON A PHYSICAL INQUIRY CONDUCTED AT PUNE MULTIPLEX AND BARODA MULTIPLEX WHEN IT WAS FOUND THAT THE ASSESSEE HAS N OT SATISFIED THE CONDITIONS PRESCRIBED UNDER RULE 18DB FOR GRANT OF DEDUCTION U/S.80IB OF THE ACT. 1 ST GROUND IS IDENTICAL WITH GROUND NO. 1 OF REVENUE A PPEAL FOR 06- 07. WE WHILE DECIDING THE ISSUE IN REVENUES APPEAL FOR A.Y. 06-07 HEREINABOVE HAVE DISMISSED THE APPEAL OF THE REVENU E WE FOR THE SAME REASONS STATED THEREIN DISMISS THE GROUND OF REVENU E. IN THE RESULT, THIS GROUND OF REVENUE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO CLAIM OF DEDUCTION U/S. 80IB. 28. DURING THE COURSE OF ASSESSMENT PROCEEDING, A.O NOT ICED THAT ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF MULTIPLEXES AT PUNE AND BARODA. A.O NOTICED THAT SIMILAR CLAIM WAS BEFORE HIS PREDECESS OR IN A.Y. 03-04 TO 06-07 WHERE IT WAS CONCLUDED THAT DUE TO DEFICIENCY IN TECHNICAL ASPECTS IN BUILDING MULTIPLEXES AS PROVIDED IN SECTION 80IB , ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION AND ACCORDINGLY DENIED THE C LAIM OF ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY HOL DING AS UNDER:- 4. 1 DURING THE COURSE OF HEARING THE ASSESSEE HAS RELIED ON THE SUBMISSIONS MADE IN THE APPEAL NO. CAB- 1/65/2006-07 FOR AY 2003-04 AND MY ORDER IN TH E SAME APPEAL, WHEREIN AFTER DISCUSSING THE ISSUE AT LENGTH AND AFTER CONSIDERING THE VARIOUS P ROVISIONS, COPIES OF THE PLANS, SUBMISSIONS OF THE ASSESSEE AND THE OBSERVATIONS OF THE AO, I HAVE CON CLUDED THAT BOTH THE MULTIPLEXES SATISFIED THE PRESCRIBED CONDITIONS AND HENCE WERE ELIGIBLE FOR D EDUCTION U/S 80IB. THE FACTS AND THE ISSUE FOR DETERMINATION ARE IDENTICAL IN THIS YEAR AS WELL. F OLLOWING THE RATIONALE OF MY EARLIER DECISIONS, FOR THE CURRENT YEAR ALSO THE AO IS DIRECTED TO ALLOW THE D EDUCTION U/S 80IB IN RESPECT OF BOTH THE MULTIPLEXE S. 29. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 30. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THAT T HE HONBLE TRIBUNAL WHILE DECIDING THE APPEAL OF ASSESSEE FOR 03-04 IN ITA NO. ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 22 1984/AHD/2009 HAD REMITTED THE ISSUE TO THE FILE OF A.O. HE THEREFORE SUBMITTED THAT SINCE THE FACTS IN THE YEAR ARE IDEN TICAL, THE MATTER MAY ALSO BE REMITTED TO A.O. WITH SIMILAR DIRECTIONS. L D. D.R. DID NOT OPPOSE THE SUBMISSION OF LD. A.R. 31. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. BEFORE US, BOTH THE PARTIES HAVE ADMITTED THAT THE FACTS OF THE CASE ARE SIMILAR TO EARLIER YEARS AS A.O AND CIT(A) HAS ALSO FOLLOWED THE DECISION IN EARLIER YEARS. WE FIND THAT THE CO-ORDINATE BENC H OF TRIBUNAL IN ITA NO. 1984/AHD/2009 (SUPRA) DECIDED THE ISSUE AS UNDE R:- 14. LIKE AO, LD.CIT(A) HAS ALSO DISCUSSED THE FACTU AL AS ALSO LEGAL ASPECT IN DETAIL. ON EXAMINATION O F THE PRESCRIBED RULE 18DB AND THE PROVISIONS OF SECT ION 80IB(7A) OF THE I.T. ACT, HE HAS COMMENTED THAT THE AO WHILE CONSIDERING THE BUILT-UP AREA OF THE CINEMA THEATRE HAD EXCLUDED THE COMMON AREAS COMPRISING OF PROJECTION ROOM, STAIR CASES, AIR CON DITIONING AREA, TOILETS, ADMINISTRATIVE AREA, ETC. IT WAS NOTED BY THE ID.CIT(A) THAT ONLY AUDITORIUM WAS CONSIDERED. LD. CIT(A) HAS GIVEN A FINDING QUOTE 'IF THE AIR-CONDITIONING UNIT, PROJECTION ROOM, STA IRWAYS, GANGWAYS, ETC. ARE TAKEN INTO CONSIDERATION , THE TOTAL BUILT-UP AREA OF THE CINEMA THEATRES HCC. TCD AT IKE MULTIPLEXES AT BARODA AND PUNE WOULD EXCEED THE MINIMUM PRESCRIBED ARE OF 22,500 SQ.FT. THE TOTAL BUILT-UP ARE A IN CASE OF PUNE UNIT IS 43,839 SQ.FT. AND IN THE CASE OF BARODA UNIT IS 40, 281 SQ.FT. HENCE, I AM OF THE OPINION THAT THE AO W AS NOT JUSTIFIED IN DENYING THE DEDUCTION N/.SOIB ON T HIS GROUND. ' UNQUOTE . HE HAS ALSO GIVEN A FINDING THAT THE LOBBIES AT BARODA AND AT PUNE WERE CONTIGU OUS THEREFORE CONNECTED. HIS FINDING WAS QUOTE 'SO FAR AS THE OTHER OBJECTION OF THE AO IS CONCERN ED I.E., THAT THE AREA OF THE LOBBIES WAS LESS THAN 3 SQ.FT. PER SEAT, IT IS PERTINENT TO NOTE THAT THE T OTAL NUMBER OF SEATS IN THE PUNE UNIT WAS 1316 AND IN THE BARODA UNIT WAS 1318. HENCE THE AREAS OF THE LOBBIE S IN THE TWOMULTIPLEXES SHOULD HAVE BEEN MINIMUM OF 3948 SQ.FT. AND 3954 SQ.FT. AS PER THE C ERTIFICATE OF THE CHARTERED ACCOUNTANT FAMISHED IN FORM NO.LOCCBA, THE AREA OF THE LOBBY IN PUNE MULTI PLEX WAS 5375 SQ.FT. AND THE AREA OF THE LOBBIES OF BARODA UNIT WERE 5135 ARID 3972 SQ.FT. RESPECTIV ELY. REGARDING THE NON-CONTIGUOUS OR DISCONTINUOUS NATURE OF THE LOBBIES AS ASSERTED BY THE ASSESSING OFFICER, THE BUILDING PLAN AND ARCHITECTURAL DRAWIN GS OF THE T\VO MULTIPLEXES WERE CALLED FOR AND EXAMINE D. ' UNQUOTE. HE HAS ALSO CONSIDERED THE OXFORD DICTIONARY MEANING OF THE TERM 'LOBBY' AND HELD THA T THE CORRIDORS ARE TO BE CONSIDERED AS A PART OF THE LOBBY. FINALLY, IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S.80IB OF THE ACT. 14.1 NOW THE REVENUE IS BEFORE US. REVENUE'S OBJECT ION IS THAT THE TECHNICAL QUESTION OF APPLICABILITY OF RULE 18DB SHOULD NOT HAVE BEEN DECIDED BY ID.CIT(A) WITHOUT OBTAINING AN ASSISTANCE FROM A QUALIFIED PERSON. LD.CIT(A) COULD HAVE REFERRED THE MATTER TO THE DISTRICT VALUATION OFFICER TO GET HI S COMMENTS. IT WAS A DISPUTE TO BE DECIDED ON THE BAS IS OF A SPOT ENQUIRY SO AS TO ASCERTAIN THE SPECIFICATION OF BUILDING CONSTRUCTION IN THE LIGHT OF THE PROVISIONS OF THE ACT, BUT THE HELP OF AN E XPERT WAS NOT TAKEN BY THE FIRST APPELLATE AUTHORITY AND THEREFORE FAULTED IN GRANTING THE EXEMPTION. 15. DURING THE COURSE OF HEARING, ID.AR MR.S.N.SOPA RKAR HAD SOUGHT PERMISSION TO PLACE ON RECORD THE CONSTRUCTION PLAN FOR BOTH THE MULTIPLEXES OF B ARODA AND PUNE. THOSE PLANS WERE FILED BEFORE US. THE MAPS AND SITE PLANS NOW PLACED BEFORE US ARE TE CHNICAL AND FOR US IT IS NOT EASY TO EAR-MARK THE AREAS PRESCRIBED FOR LOBBY, FOR PROJECTOR ROOM, ARE A OF THEATRE AND THE AREA OCCUPIED, AIR- CONDITIONING, PARKING, AREA OF EACH CINEMA SEAT ETC .ETC. LD. CIT(A) HAS NOT OBTAINED ANY REMAND REPORT FROM THE REVENUE DEPARTMENT WHILE DECIDING T HE TECHNICAL ISSUE OF THE CONSTRUCTION OF THE MULTIPLEX. THE CONNECTED RULE HAS ISSUED GUIDELINE FOR CONSTRUCTION OF A MULTIPLEX, ACCORDING TO WHICH ITA NOS. 272, 273, 441 & 1097/A/2010 . A.YS. 2006-07 & 2007- 08 23 TOTAL BUILT-UP AREA OF A CINEMA THEATRE COMPRISING MULTIPLEX SHOULD NOT BE LESS THAN 22500 SQ.FT. AND SHOULD CONSISTS ATLEAST 50% OF THE BUILT-UP AREA, E XCLUDING THE PARKING AREA, A MULTIPLEX SHOULD COMPRISE OF ATLEAST THREE CINEMA THEATRES. IT SHOUL D ALSO HAVE COMMERCIAL SHOPS. THE CAPACITY OF CINEMA THEATRE SHOULD BE ATLEAST 900 SEATS AND CINE MA THEATRE SHOULD NOT HAVE LESS THAN 100 SEATS. COMMERCIAL SHOPS SHOULD NOT BE LESS THAN 3000 SQ. F T, HOWEVER, THE MINIMUM BUILT-UP AREA OF EACH SHOP SHOULD NOT BE LESS THAN 250 SQ.FT. A MULTIPLEX IS REQUIRED TO BE CENTRALLY AIR-CONDITIONED. THE CINEMA THEATRE SHOULD USE SEAT-BATCH NOT LESS THAN 20 INCHES. FROM THE DETAILS FURNISHED BEFORE US SPECIALLY THE MAPS GIVEN IT IS DIFFICULT FOR US TO GIVE A FINDING THAT THE LAY OUT PLAN WAS IN-CONFORM ITY WITH THE PRESCRIBED IT RULES. IN THE INTEREST OF NA TURAL JUSTICE, WE DEEM IT PROPER TO RESTORE THIS GR OUND OF THE REVENUE BACK TO THE STAGE OF THE AO TO DECID E AFRESH, NEEDLESS TO SAY AFTER PROVIDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IT IS FOR THE ASSESSEE AS ALSO FOR THE AO TO TAKE ASSISTANCE FROM A TECHNICAL PERSON, SUCH AS, AN ARC HITECT OR A CIVIL ENGINEER TO ASCERTAIN THE FULFILLMENT OF THE CONDITIONS AS PRESCRIBED UNDER T HE STATUTE OF I.T. ACT. WITH THESE OBSERVATIONS, GROUND MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 32. SINCE THE FACTS IN THE YEAR UNDER APPEAL ARE SIMILA R TO THAT OF EARLIER YEARS, WE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINA TE BENCH, AND WITH SIMILAR DIRECTIONS REMIT THE MATTER TO A.O. THUS TH IS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 33. IN THE RESULT, REVENUES APPEAL IN ITA NO. 441/AHD/ 2010 IS DISMISSED AND 1097/AHD/2010 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ASSESSEES APPEAL IN ITA NOS. 272 & 273/AHD/2010 ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 05 - 08 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT 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, AHMEDABAD