ACIT 11(1), MUMBAI V. SWANSTON MULTIPLEX CINEMA P.LTD, MUMBAI

ITA 6031/MUM/2012

• Counselvise Citation: 603119914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIPDR
• Keywords: Depreciation; Capital receipt; Revised return
• Section: 10

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER . / ITA NO.6031/MUM/2012 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR: 2008-09 ACIT-11(1), ROOM NO.439, AAYKAR BHAVAN, M.K.MARG, MUMBAI-400020 VS. M/S SWANSTON MULTIPLEX CINEMA PVT. LTD. 2 ND FLOOR, FAME ADLABS, ANDHERI LINK ROAD, OSHIWARA, MUMBAI-400053 ( # / REVENUE) ( $%&' / RESPONDENT ) P.A. NUMBER : AAFCS6295K # ( ) / REVENUE BY: SHRI NEIL PHILIP-DR $%&' ( ) / RESPONDENT BY NONE ! ( *+ / DATE OF HEARING : 17/12/2014 ,-' ( *+ / DATE OF PRONOUNCEMENT : 18/12/2014 O R D E R PER JOGINDER SINGH, JM: THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 09/07/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, ON THE GROUND IN TREATING THE ENTERTAINMENT TAX SUBSIDY OF RS.48,87,059/-, GRANTED BY THE STATE GOVERNMENT, AS CAPITAL RECEIPT WITHOUT CONSIDERING THE FACT THAT THE DEPAR TMENT HAS FILED 2 M/S SWANSTON MULTIPLEX CINEMA PVT. LTD . . SLP AGAINST THE DECISION OF HONBLE BOMBAY HIGH COU RT IN CIT VS CHAPALKAR BROTHERS, PUNE. 2. AT THE TIME OF HEARING, SHRI NEIL PHILIP, LD. DR , ADVANCED HIS ARGUMENTS IDENTICAL TO THE GROUND RAISED. NONE APP EARED FOR THE ASSESSEE. REGISTERED A.D. NOTICE WAS SENT TO THE A SSESSEE ON THE ADDRESS AVAILABLE ON RECORD, WHICH WAS RETURNED BAC K BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT, THEREFOR E, WE HAVE NO OPTION BUT TO PROCEED EX-PARTY, QUA THE ASSESSEE, A ND PROCEED TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVA ILABLE ON RECORD. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE SHOWED INCOME OF RS.1,41,23,997/- AND SUBS EQUENTLY REVISED TO RS.92,36,938/-. IN THE REVISED RETURN, THE ASSESSEE REDUCED THE CLAIM OF SUBSIDY RECEIVED FROM MAHARASH TRA GOVERNMENT UNDER MULTIPLEX POLICY. THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE LD. ASSESSING OFFICER BY FOLLOWING THE DECISIONS IN CIT VS PREMIER PROTEINS LTD. (2006) 150 TAXMAN 42 ( MP), WHEREIN, IT WAS HELD THAT SUBSIDIES GIVEN FOR RUNNING BUSINE SS I.E. AFTER PRODUCTION HAS BEGUN IN THE PLANT, THEN IT MAY BE R EGARDED AS A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE. SIMI LARLY, THE LD ASSESSING OFFICER ALSO RELIED UPON THE DECISION IN CIT VS PONNI SUGAR & CHEMICALS LTD. (2008) 174 TAXMAN. 87 (SC), SAHANI STEELS & PRESS WORK LTD. 228 ITR 253 (SC), KESO RAM INDUSTRIES & COTTON MILLS LTD. VS CIT 115 ITR 143 (KOL.), DHRANG ADHRA CHEMICALS WORK LTD. 106 ITR 473 (BOM.) AND MUDIT RE FRIGERATION 3 M/S SWANSTON MULTIPLEX CINEMA PVT. LTD . . INDUSTRIES VS ACIT 84 ITD 289. THE STAND OF THE ASS ESSING OFFICER AS WELL AS OF THE LD. DR IS THAT INCENTIVE/CONCESSI ON, IN THE FORM OF ENTERTAINMENT DUTY EXEMPTION, HAS BEEN GRANTED TO C ARRY ON ITS BUSINESS OF TRADE THUS IT IS A TRADING RECEIPT. 2.2. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCO ME TAX (APPEALS), THE ASSESSEE, VIDE LETTER DATED 12/10/2 010, RELIED UPON A RESOLUTION OF THE STATE GOVERNMENT DATED 20/09/20 01 AND SUBMITTED THAT THE BUSINESS OF OPERATING MULTIPLEXE S AND THE SUBSIDY FROM THE STATE GOVERNMENT IS A CAPITAL RECE IPT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE DECISION OF THE TRIBUNAL IN INOX LEISURE LTD. VS DCIT (ITA NO.1 984/AHD/2009) DATED 09/09/2011, WHEREIN IT WAS HELD THAT THE SUBS IDY IS COLLECTED AS ENTERTAINMENT DUTY ON SALE OF TICKETS, IS A CAPITAL RECEIPT. WHILE COMING TO THIS CONCLUSION, THE BENC H OF THE TRIBUNAL FOLLOWED THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF CHAPHALKAR BROTHERS. LIKEWISE, IN CIT VS CHAPHALKAR BROTHERS, PUNE, THE HONBLE JURISDICTIONAL HIGH CO URT (ITA NO.1036/2010 & ITA NO.1147/2010), ON THE ISSUE WHET HER THE ENTERTAINMENT DUTY SUBSIDY GIVEN BY THE STATE GOVER NMENT FOR CONSTRUCTION OF MULTIPLEXES IS IN THE NATURE OF RE VENUE RECEIPT OR CAPITAL RECEIPT, THE HONBLE HIGH COURT UPHELD TH E DECISION OF THE TRIBUNAL BY HOLDING AS UNDER: SINCE THE OBJECT OF SUBSIDY WAS TO PROMOTE CONSTRU CTION OF MULTIPLEX THEATER COMPLEXES, IN OUR OPINION, RECEIP T OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. THE FACT THE SUBSIDY WAS NOT MEANT FOR REPAYING THE LOAN TAKEN FOR CONST RUCTION 4 M/S SWANSTON MULTIPLEX CINEMA PVT. LTD . . OF MULTIPLEXES CANNOT BE A GROUND TO HOLD THAT SUBS IDY RECEIPT WAS ON REVENUE ACCOUNT, BECAUSE, IF THE OBJ ECT OF THE SCHEME WAS TO PROMOTE CINEMA HOUSES BY CONSTRUCTING MULTIPLEX THEATRES, THEN IRRESPECTIVE OF THE FACT T HAT THE MULTIPLEXES HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS, THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. IN THE LIGHT OF THE AFORESAID OBJECTS OF THE SCHEME FRAMED BY THE STATE GOVERNMENT, THE DECISION OF THE INCOME TAX APPELLANT TRIBUNAL THAT THE AMOUNT OF SUBSIDY R ECEIVED BY THE ASSESSEE IS ON CAPITAL ACCOUNT CANNOT BE FAU LTED. ACCORDINGLY, BOTH THE APPEALS ARE DISMISSED WITH NO ORDER AS TO COSTS 2.3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) P LACING RELIANCE AFORESAID DECISION FROM THE HONBLE JURISD ICTIONAL HIGH COURT ALSO CONSIDERED THE DECISION IN GODREJ AGROVE T LTD. VS ACIT (ITA NO.1629/MUM/2009) ORDER DATED 17/09/2010, WHE REIN, FOLLOWING THE DECISION FROM HONBLE APEX COURT, IN P.J. CHEMICAL LTD., WHEREIN, IT WAS HELD THAT SUBSIDY RECEIVED BY ASSESSEE CANNOT BE REDUCED FROM THE VALUE OF BLOCK OF ASSET FOR COMPUTING DEPRECIATION, AND ALSO THE CASE OF SASIRI EXTRACTIO N LTD. VS ACIT (2008) 307 ITR (AT) 127/122 ITD 428 (VISHAKHAPATNAM ) DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION FRO M THE DECISION IN SASIRI EXTRACTION LTD. (SUPRA) IS REPRODUCED HEREUN DER: 11.WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PURSED THE RECORD. IN OUR CONSIDERED OPINION, EVEN AFTER INSERTION OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDERLYING IN THE DECISION OF THE APEX COURT IN THE CASE OF P.J. CHEMICALS LTD. (SUPR A) 5 M/S SWANSTON MULTIPLEX CINEMA PVT. LTD . . STILL HOLD THE FIELD. THEIR LORDSHIPS ANALYZED THE EXPRESSION MET DIRECTLY OR INDIRECTLY TO COME TO THE CONCLUSION THAT ONLY IN A CASE WHERE AS SUBSIDY OR OTHER GRANT WAS GIVEN TO OFFSET THE COST OF AN ASSET, SUC H PAYMENT/GRANT WOULD FALL WITHIN THE EXPRESSION MET , WHEREAS THE SUBSIDY RECEIVED MERELY TO ACCELERATE T HE INDUSTRIAL DEVELOPMENT OF THE STATE CANNOT BE CONSIDERED AS PAYMENTS MADE SPECIFICALLY TO MEET A PORTION OF THE COST OF THE ASSETS. 2.4. IF THE TOTALITY OF FACTS AND THE JUDICIAL PRON OUNCEMENTS, DISCUSSED HEREINABOVE, ARE ANALYZED WITH THE FACTS OF THE CASE, WE FIND THAT THE GOVERNMENT OF MAHARASHTRA VIDE ORD INANCE XXIV DATED 17/08/2000, TO COMMEMORATE THE BIRTH CEN TENARY OF CHITRAPATI LATE V.SHANTARAM, DECIDED TO GRANT CONCE SSION IN ENTERTAINMENT DUTY TO THE MULTIPLEX THEATRES COMPLE X TO PROMOTE CONSTRUCTION OF NEW CINEMA HOUSES, IN THE STATE, THEREFORE, DECIDED TO GRANT 100% FROM THE FIRST THREE YEARS FR OM THE DATE OF COMMENCEMENT OF SUCH COMPLEX AND 75% FOR SUBSEQUENT TWO YEARS. THIS ISSUE HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS CHAPHALKAR BROTHERS, UPHOLDING THE DECISION OF THE TRIBUNAL, AS WE HAVE DISCUSSED IN P ARA 2.2. (SUPRA) OF THIS ORDER. THE SUBSIDY GIVEN BY THE ST ATE GOVERNMENT IS FOR THE INDUSTRIAL GROWTH OF THE STATE, THEREFOR E, IT IS A CAPITAL RECEIPT, BECAUSE THE SUBSIDY WAS GIVEN FOR STARTING MULTIPLEXES IN THE STATE. RESPECTFULLY, FOLLOWING THE AFORESAID D ECISION FROM HONBLE BOMBAY HIGH COURT, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX 6 M/S SWANSTON MULTIPLEX CINEMA PVT. LTD . . (APPEALS). THE STAND OF THE LD. FIRST APPELLATE AU THORITY IS THEREFORE, UPHELD. 2.5. SO FAR AS, FILING OF SLP BY THE DEPARTMENT, A GAINST THE DECISION OF THE HONBLE HIGH COURT, IS CONCERNED, W E ARE NOT INFLUENCED BY SUCH FILING BECAUSE AS ON TODAY, THE DECISION FROM THE HONBLE JURISDICTIONAL HIGH COURT STANDS, WHICH WE ARE BOUND TO FOLLOW. HOWEVER, IF AT THE LATER STAGE, ANY CON TRARY DECISION IS TAKEN BY THE HONBLE APEX COURT THEN THE LAW WILL T AKE ITS OWN COURSE, THEREFORE, WE FIND NO MERIT IN THIS ARGUMEN T ALSO. FINALLY, APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 17/12/2014. SD/- SD/- (R.C.SHARMA) ( JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED -18/12/2014 F{X~{T? P.S/. ! . . ( (( ( $*. $*. $*. $*. /.'* /.'* /.'* /.'* / COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. $%&' / THE RESPONDENT. 3. 0 ( ) / THE CIT(A)- 4. 0 / CIT 5. .12 $*! , , / DR, ITAT, MUMBAI 6. 23 4 / GUARD FILE. ! ! ! ! / BY ORDER, %.* $* //TRUE COPY// 5 55 5 / 6 6 6 6 # # # # (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI