ACIT 11(1), MUMBAI V. FAME INDIA LTD, MUMBAI

ITA 6365/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100696 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 27-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Capital receipt; Revised return; Capital expenditure
• Section: 14A

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI VIJA Y PAL RAO, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT, MEMBER ITA NO.6365 /MUM/2010 & ITA NO. 1095/MUM/2011 (ASSESSMENT YEAR 2006 - 07) ITA NOS.6387 /MUM/2010 (ASSESSMENT YEAR 2007 - 08 ) ITA NO.7773/MUM/2011 (ASSESSMENT YEAR 2008 - 09) ASST. COMMISSIONER OF INCOME - TAX 11(1), MUMBAI. APPELLANT VS. M/S. FAME INDIA LTD. (NOW KNOWN AS INOX LEISURE LTD.) , VIRAJ TOWERS, 9 TH FLOOR, NEXT TO ANDHERI (EAST) MUMBAI - 400020 PAN AADCS7809P RESPONDENT AND ITA NO.1810 & 7965/MUM/2011 (ASSESSMENT YEARS 2006 - 07 & 2008 - 09) AND ITA NOS.6046/MUM/2010 (ASSESSMENT YEAR 2007 - 08) (BY THE ASSESSEE) A SSESSEE BY SHRI PANKAJ KUMAR (DR). REVENUE BY S/SHRI G.M.DOSS & RANDHIR KR. GUPTA DATE OF HEARING 0 4 /08/2015 DATE OF PRONOUNCEMENT 21 /08/2015 ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 2 OF 32 O R D E R PER BENCH: THESE ARE CROSS APPEALS ARISING FROM THE RESPECTIVE ORDERS OF THE CIT(A) FOR THE ASSESSMENT YEARS 2006 - 07 TO 2008 - 09. 2. THE REVENUE HAS FILED TWO SETS OF APPEALS IN ITA NOS. 6365/MUM/2010 AND ITA NO.1095/MUM/2011 FOR THE ASSESSMENT YEAR 2006 - 07. FROM THE PERUSAL OF RECORDS AND GROUNDS RAISED BY THE REVENUE IN THESE TWO APPEALS IT TRANSPIRES THAT THE APPEAL OF THE REVENUE I N ITA 6365/2010 DOES NOT ARISE FROM THE IMPUGNED ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2006 - 07. EVEN OTHERWISE, IT IS A DUPLICATE APPEAL OF THE REVENUE AND THE PROPER APPEAL OF REVENUE AGAINST THE IMPUGNED ORDER IS ITA 1095/2011. THIS FACT HAS NOT B EEN DISPUTED BY THE LEARNED DR THAT THE APPEAL FILED BY THE REVENUE IN ITA 6365/2010 DOES NOT ARISE FROM THE IMPUGNED ORDER OF THE CIT(A) AND FURTHER IT IS A DUPLICATE APPEAL. THEREFORE, IN VIEW OF THE ABOVE FACT, TH E APPEAL OF THE REVENUE IN ITA 6365/201 0 IS DISMISSED BEING DUPLICATE APPEAL AS WELL AS NOT MAINTAINABLE AS IT DOES NOT EMANAT E FROM THE IMPUGNED ORDER OF THE CIT(A). 3. FOR THE AY 2006 - 07, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS THE APPELLANT OBJECTS TO THE ORDER DATED 22 NOVEMBER 2010 PASSED BY THE COMMISSIONER OF ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 3 OF 32 INCOME - TAX (APPEALS) 3, MUMBAI ['CIT(A)'] FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING AMONG OTHER GROUNDS I. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO QUANTIFY THE INDIRECT EXPENDITURE BY ADOPTING REASONABLE BASIS FOR EFFECTING APPORTIONMENT, FOR THE PURPOSES OF COMPUTING DISALLOWANCE UNDER SECTION 14A OF THE INCOME - TAX ACT. 2. THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO REDUC E THE COST I WRITTEN DOWN VALUE OF PLANT AND MACHINERY BY THE AMOUNT OF ENTERTAINMENT TAX SUBSIDY. 3. THE LEARNED CIT(A) ERRED IN OBSERVING THAT AS THE ENTERTAINMENT TAX SUBSIDY PERTAINS TO THE CREATION OF INFRASTRUCTURE AND DEVELOPMENT/CONSTRUCTION OF THE THEATRE I.E. CAPITAL COST, THIS WOULD GO TOWARDS REDUCING THE CAPITAL COST OF CONSTRUCTION OF MULTIPLEX THEATRES AND PLANT AND MACHINERY. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOUT PREJUDICE TO THE OTHER. 5. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO THE GROUNDS OF APPEAL. GROUND NO.1 REG. DISALLOWANCE U/S 14A OF THE IT ACT. 4. THE AO NOTICED THAT ASSESSEE HAS CLAIMED DIVIDEND INCOME OF RS.3,98,536/ - AS EXEMPT FROM TAX. AO FOUND THAT THERE IS A SUBSTANTIAL TAX EXEMPT INVESTMENT IN THE FORM OF MUTUAL FUND AND LONG TERM INVESTMENT. AO HAS MADE DISALLOWANCE AS PER SEC.14A READ WITH RULE 8D OF THE IT RULES. AO HAS TAKEN INTEREST COST DEBITED TO P&L ACCOUNT AT RS.3,70,95,268 AND ACCORDINGLY WORKED OUT THE DISALLOWANCE U/S 14 A ON ACCOUNT OF INTEREST EXPENDITURE AT RS.105,73,762/ - ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 4 OF 32 AND FURTHER DISALLOWANCE ON ACCOUNT OF INDIRECT EXPENSE AT RS.12,51,942/ - . THUS THE TOTAL DISALLOWANCE MADE BY THE AO U/S 14A ON ACCOUNT OF INTEREST EXPENDITURE AS WELL AS INDIRECT EXPENSES COMES TO RS.1,18,25,704/ - COMPUTED AS PER RULE 8D. 4 . 1 THE A SSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT( A) AND CONTENDED THAT THE ASSESSEE WAS HAVING ITS OWN SUFFICIENT FUND FOR INVESTMENT IN THE MUTUAL FUND AS WELL AS LONG TERM INVESTMENT AND THEREFORE DISALLOWANCE MADE BY THE AO U/S 14A IS NOT CALLED FOR. IT WAS FURTHER CONTENDED THAT SINCE THESE INVESTMEN TS WERE MADE IN THE EARLIER YEAR AND THERE IS NO FRESH INVESTMENT DURING THE YEAR UNDER CONSIDERATION, THEREFORE, NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE , WHICH COULD BE APPORTIONED IN RELATION TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE ON THE INVESTMENT. THE CIT(A), THOUGH HELD THAT RULE 8D IS NOT APPLICABLE FOR THE ASSESSMENT YEAR 2006 - 07, HOWEVER, AO WAS DIRECTED TO ADOPT REASONABLE BASIS FOR EFFECTING APPORTIONMENT. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE HAS FILED THE PRESENT APPEA L. 4 . 2 BEFORE US , LEARNED AR OF THE ASSESSEE SUBMITTED THAT INVESTMENTS WERE MADE OUT OF OWN FUNDS AND THEREFORE NO DISALLOWANCE IS CALLED FOR U/S 14A ON ACCOUNT OF INTEREST EXPENDITURE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY SPECIF IC EXPENDITURE FOR EARNING DIVIDEND INCOME ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 5 OF 32 ON TAX - FREE INCOME. ASSESSEE RECEIVED THE DIVIDEND INCOME FROM MUTUAL FUNDS/SECURITIES IN WHICH INVESTMENT WAS MADE IN THE EARLIER YEAR. THEREFORE, ASSESSEE HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT IN COME. HE HAS REFERRED TO THE SHARE CAPITAL OF THE COMPANY AT RS.31.56 CRORE AND RESERVE AT RS.30.92 CRORE AS ON 31/3/2006 AND SUBMITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT OWN FUNDS TO MAKE INVESTMENT. AS REGARDS SECURED LOANS AND BANK OVERDRAFT AS WELL AS LONG - TERM LOAN ARE CONCERNED, SAME HAS BEEN SPECIFICALLY TAKEN FOR WORKING CAPITAL REQUIREMENT AND NOT FOR THE PURPOSE OF MAKING INVESTMENT IN MUTUAL FUND. LEARNED AR OF THE ASSESSEE FURTHER SUBMITTED THAT IPO PROCEEDS WERE PARTLY USED FOR MAKING INVESTMENT IN THE MUTUAL FUND AND THEREFORE ASSESSEE DID NOT UTILIZE THE BORROWED FUND. ALTERNATIVELY, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT EVEN IF THERE IS MIXED FUND CONSISTING OF OWN FUNDS AND BORROWED FUNDS, IT CANNOT BE PRESUMED THAT PAYMEN T FOR INVESTMENT IN TAX - FREE SECURITIES CAME FROM BORROWED FUNDS AND NOT FROM OWN FUNDS. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., ( 313 ITR 340(BOM) . THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE U/S 14A IS CALLED FOR AND THE SAME IS REQUIRED TO BE DELETED. ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 6 OF 32 4.3 ON THE OTHER HAND, LEARNED DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS SUBSTANTIAL BANK OVERDRAFT AND INTEREST - BEARING FUNDS AND IN THE ABSENCE OF RELEVANT RECORDS TO SHOW THAT BORROWED FUND WAS NOT USED FOR THE PURPOSE OF INVESTMENT IN SECURITIES/MUTUAL FUND, IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS INVESTED IN MUTUAL FUNDS FROM ITS OWN INTEREST - FREE FUNDS. THE CIT(A) HAS CONSIDERED THIS CONTENTION OF THE ASSESSEE AND HAS GIVEN A FINDING THAT THERE IS NO CLEAR NEXUS BETWEEN SHARE ISSUE EXPENSES CLAIMED AND AMORTIZED INVESTMENT OF RS.5 CRORE IN MUTUAL FUND. F URTHER, THE CIT(A) HAS DIRECTED THE AO TO VERIFY THE C LAIM OF THE ASSESSEE THAT INVESTMENT IN MUTUAL FUND HAS BEEN MADE FROM IPO PROCEEDS. 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THE ASSE SSMENT PROCEEDINGS, AO HAS MADE DISALLOWANCE BY TAKING INTO CONSIDERATION INTEREST EXPENDITURE AS WELL AS OTHER EXPENDITURE DEBITED TO THE P&L ACCOUNT BY THE ASSESSEE AND APPORTIONED THE SAME IN RESPECT OF TAX - FREE INCOME BY APPLYING RULE 8D. SO FAR AS AP PLICABILITY OF RULE 8D IS CONCERNED, CIT(A) HAS ALREADY HELD THAT RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND THEREFORE THERE IS NO GRIEVANCE OF THE ASSESSEE TO THE EXTENT OF DISALLOWANCE COMPUTED BY THE AO BY APPLYING RULE 8D. THE ASSE SSEES MAIN CONTENTION IS THAT ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 7 OF 32 INVESTMENT IN MUTUAL FUNDS HAS BEEN MADE BY THE ASSESSEE FROM ASSESSEES OWN FUND. IT IS PERTINENT TO NOTE THAT THIS FACT WAS NEITHER EXAMINED BY THE AO NOR BY THE CIT(A). FURTHER ASSESSEE HAS CLAIMED THAT INVESTMENT WAS MA DE FROM IPO PROCEEDS. FOR THE SAKE OF ARGUMENT IF IT I S ACCEPTED THAT INVESTMENT WAS MADE PARTLY FROM IPO PROCEEDS, THEN EXPENDITURE ON THE IPO CLAIMED BY ASSESSEE HAS TO BE APPORTIONED U/S 14A SO FAR AS THE PROCEEDS OF IPO WAS USED FOR INVESTMENT IN TAX - FREE SECURITIES. AS REGARDS APPORTIONMENT OF INDIRECT EXPENSES ARE CONCE RNED, WE FIND THAT THERE WAS MOVEMENT IN THE INVESTMENT PORT FOLIO AND ASSESSEE HAS TAKEN DECISION OF SALE AND PURCHASE OF SECURITIES DURING THE YEAR UNDER CONSIDERATION. ONCE THE RE IS MOVEMENT IN THE INVESTMENT PORTFOLIO THEN INDIRECT EXPENDITURE HAS TO BE APPORTIONED U/S 14A OF THE ACT. IT IS PERTINENT TO NOTE THAT THE PROVISION OF SECTION 14A IS BASED ON THE PRINCIPAL OF APPORTIONMENT OF EXPENDITURE WHICH HAS BEEN INCURRED FOR A COMPOSITE ACTIVITY RESULTING TAXABLE AND NON - TAXABLE INCOME. THEREFORE, P ART OF THE EXPENDITURE, WHICH HAS BEEN INCURRED FOR INCOME NOT FORMING PART OF TOTAL INCOME OF THE ASSESSEE, IS LIABLE TO BE DISALLOWED AS PER THE SCHEME OF SEC.14A. SINCE THERE W AS A MOVEMENT AND SHUFFLING OR CHANGES IN INVESTMENT PORTFOLIO DURING THE YEAR UNDER CONSIDERATION THEREFORE DISALLOWANCE U/S 14A IS MANDATORY AND ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 8 OF 32 CONSEQUENTIAL. HOWEVER, SINCE RULE 8D IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION THEREFORE THE TRI BUNAL HAS BEEN CONSISTENTLY TAKING A VIEW THAT A REASONABLE BASIS FOR DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES WOULD BE 2% OF THE DIVIDEND INCOME. ACCORDINGLY, WE DIRECT THE AO TO EXAMINE AVAILABILITY OF ASSESSEES OWN FUNDS AS WELL AS THE CLAI M OF THE ASSESSEE THAT INVESTMENT IN QUESTION HAS BEEN MADE FROM PROCEEDS OF IPO AND DECIDE THE ISSUE AS PER LAW AND AFTER AFFORDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY THE ISSUE OF DISALLOWANCE U/S 14A ON ACCOUNT OF INTEREST EXPENDITUR E IS SET ASIDE TO THE RECORD OF THE AO. GROUND NOS.2 & 3 REG. ENTERTAINMENT TAX SUBSIDY AS PER SCHEME OF THE STATE GOVERNMENT: 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE CLAIMED ENTERTAINMENT TAX REBATE OF RS.3,71,52,765/ - AS CAPITAL RE CEIPT. SINCE THE CLAIM WAS NOT MADE IN THE REVISED RETURN THEREFORE , AO OBJECTED TO ENTERTAIN THE CLAIM MADE BY THE ASSESSEE . A CCORDINGLY , THE AO SUMMARILY REJECTED THE CLAIM OF THE ASSESSEE. 5.1 BEFORE THE CIT(A) ASSESSEE HAS SUBMITTED THAT THE STATE GOVERNMENT FORMULATED INCENTIVE SCHEME FOR ENCOURAGING CAPITAL INVESTMENT IN MULTIPLEX THEATRE COMPLEX, THESE INCENTIVE SCHEME WERE IN THE FORM OF EXEMPTION FROM ENTERTAINMENT DUTY FOR CERTAIN INITIA L YEARS OF OPERATION OF THE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 9 OF 32 MULTIPLEX THEATER COMPLEX ON FULFILLMENT OF PRESCRIBED CONDITIONS AND OBLIGATIONS. DURING THE ASSESSMENT YEAR 2006 - 07, ASSESSEE COLLECTED RS.6,80,13,289/ - AS ENTERTAINMENT TAX IN RESPECT OF ITS VARIOUS MULTIPLEXES OUT OF WHICH ASSESSEE GOT EXEMPTION FROM THE GOVERNMENT OF MAHARASHTRA FROM PAYMENT OF ENTERTAINMENT TAX TO THE EXTENT OF RS.3,71,52,765/ - . ASSESSEE CLAIMED THAT THE SAID SUBSIDY UNDER THE SCHEME OF THE STATE GOVERNMENT IS A CAPITAL RECEIPT OR IN THE CAPITAL ACCOUNT A ND THEREFORE IS NOT TAXABLE INCOME. THE CIT(A) HAS ACCEPTED THE CONTENTION O F THE ASSESSEE THAT SUBSIDY WOULD B E CONSIDERED AS CAPITAL RECEIPT IN THE ASSESSEES HANDS. HOWEVER, AS THE SAID SUBSIDY PERTAINS TO CREATION OF INFRASTRUCTURE AND DEVELOPMENT OF CONSTRUCTION OF THEATRE I.E CAPITAL COSTS , THIS WOULD GO TO REDUCE CAPITAL COST OF THE CONSTRUCTION OF THE MULTIPLEX THEATRE AND PLANT AND MACHINERY. ACCORDINGLY, CIT(A) HELD THAT SUBSIDY WOULD GO TO REDUCE THE COST/WRITTEN DOWN VALUE OF THE PLANT AND M ACHINERY. AO WAS DIRECTED TO REDUCE THE COST/WRITTEN DOWN VALUE AND RECALCULATE ALLOWANCE OF DEPRECIATION WHILE GIVING EFFECT TO THE ORDER. 5.2 SINCE THE CIT(A) HAS GIVEN A SUBSTANTIAL RELIEF TO THE ASSESSEE, DEPARTMENT HAS ALSO CHALLENGED THE SAID FIND ING OF THE CIT(A) BY FILING CROSS APPEAL . THEREFORE, A COMMON ISSUE ARISES IN THE ASSESSEES APPEAL AS WELL AS REVENUES APPEAL IN ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 10 OF 32 RESPECT OF TREATMENT OF ENTERTAINMENT SUBSIDY RECEIVED BY THE ASSESSEE. 5.3 THE LEARNED AR OF THE ASSESSEE SUBMITTED TH AT THE AO HAS REFUSED TO ENTERTAIN THE CLAIM OF ASSESSEE ON THE GROUND THAT IN ABSENCE OF REVISED RETURN, SUCH CLAIM CANNOT BE ENTERTAINED. HE HAS POINTED OUT THAT THE REVENUE HAS RAISED OBJECTION AGAINST ENTERTAINMENT OF FRESH CLAIM BY CIT(A) AND PLACED R ELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE ( INDIA ) LTD. VS. CIT (284 ITR 323). HOWEVER, THERE IS NO RESTRICTION ON THE POWER OF THE APPELLATE AUTHORITY TO ENTERTAIN A FRESH PLEA/CLAIM AND THEREFORE THE CIT(A) HAS RIGHTLY EN TERTAINED THE CLAIM OF THE ASSESSEE. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS PVT. LTD. (349 ITR 336) AND SUBMITTED THAT THE HON'BLE JURISD ICTIONAL HIGH COURT AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE ( INDIA ) LTD. VS. CIT(SUPRA) HAS HELD THAT THE APPELLATE AUTHORITY HAS JURISDICTION TO CONSIDER THE ADDITIONAL CLAIM. AS REGARDS THE MERITS OF THE ISSUE, LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE ENTERTAINMENT SUBSIDY RECEIVED B Y ASSESSEE IS A CAPITAL RECEIPT, HAS BEEN DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHAPHALKAR BROS ( 3 51 ITR 309 ) . HE HAS POINTED OUT THAT THE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 11 OF 32 HONBLE HIGH COURT HAS DECIDED THE ISSUE AFTER CONSIDERING THE SCHEME OF THE STATE GOVERNMENT UNDER WHICH SUBSIDY OF ENTERTAINMENT TAX/DUTY HAS BEEN GIVEN FOR CONSTRUCTION OF MULTIPLEXES. 5. 4 ON THE OTHER HAND, LEARNED DR HAS SUBMITTED THAT THE CHARAC TER OF SUBSIDY HAS TO BE DETERMINED BY APPLYING THE TEST OF RECEIPT IN THE HANDS OF THE ASSESSEE AND THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN THE CASE IN HAND, SUBSIDY IS NOT GIVEN FOR REPAYMENT OF ANY CAPITAL LIABILITY OR CONCESSION IN THE COST OF T HE MACHINERY OR CONSTRUCTION COST OF THE MULTIPLEX BUT THE SUBSIDY HAS BEEN GIVEN TO ENABLE ASSESSEE O RUN BUSINESS MORE PROFITABLY AND MAKE BUSINESS VIABLE. THEREFORE, RECEIPT IS ON REVENUE ACCOUNT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE SAHNEY STEELS LTD. VS. CIT ( 228 ITR 253 ) AS WELL AS IN THE CASE OF CIT VS PONNI SUGARS AND CHEMICALS LTD ( 306 ITR 392 ) . THUS, LEARNED DR HAS CONTENDED THAT WHEN THE SUBSIDY IS GIVEN WITH THE OBJECT TO RUN THE BUSINESS MORE PROFITABLY, THEN THE RECEIPT IS ON REVENUE ACCOUNT AND NOT ON CAPITAL ACCOUNT. IN REJOINDER, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT BOTH THESE DECISIONS OF THE HONBLE SUPREME COUR T HAVE BEEN CONSIDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. CHAP HALKAR BROS. (SUPRA) . ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 12 OF 32 5.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE OBJECTION OF THE REVENUE REGARDING ENTERTAINMENT OF FRESH CLAIM/ADDITIONAL CLAIM OF THE ASSESSEE BY CIT(A) WITHOUT FILING REVISED RETURN OF INCOME, IT IS SETTLED PROPOSITION OF LAW THAT THE BAR ON ENTERTAINING THE FRESH CLAIM IS ONLY ON THE JURISDICTION OF THE AO AND NOT ON THE JU RISDICTION OF THE APPELLATE AUTHORITY. THIS ISSUE WAS SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPOR A TION (229 ITR 383) WHEREIN HON'BLE SUPREME COURT HAS HELD THT THE APPELLATE AUTHORITY HAS JURISDICTION TO ENTERTAIN FRESH CLAIM/PLEA IF THE ADJUDICATION OF THE SAID PLEA DOES NOT REQUIRE INVESTIGATION OF FACT. WE FURTHER NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA) AS UNDER: THE TRIBUNAL DECLINED TO ENTERTAIN THESE ADDITIONAL GROUNDS. THE SUPREME COURT DID NOT ANSWER THE QUESTION ON MERITS, BUT FRAMED THE FOLLOWING QUESTION AND HELD AS UNDER : - 4. THE TRIBUNAL HAS FRAMED AS MANY AS FIVE QUESTIONS WHILE MAKING A REFERENCE TO US. SINCE THE TRIBUNAL HAS NOT EXAMINED THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ON MERIT, WE DO NOT PROPOSE TO ANSWER THE QUEST IONS RELATING TO THE MERIT OF THOSE CONTENTIONS. WE REFRAME THE QUESTION WHICH ARISES FOR OUR CONSIDERATION IN ORDER TO BRING OUT THE POINT WHICH REQUIRES DETERMINATION MORE CLEARLY. IT IS AS FOLLOWS: WHERE ON THE FACTS FOUND BY THE AUTHORITIES BELOW A Q UESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHORITIES) WHICH BEARS ON THE TAX LIABILITY OF THE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 13 OF 32 ASSESSEE, WHETHER THE TRIBUNAL HAS JURISDICTION TO EXAMINE THE SAME. UNDER SECTION 254 OF THE INCOME TAX ACT THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH THE APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. WE DO NOT SEE ANY RE ASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEA1/CROSS OBJECTIONS BEFO RE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 18. IN THE CASE BEFORE US, THE CIT(A) AND THE TRIBUNAL HAVE HELD THE OMISSION TO CLAIM TH E DEDUCTION OF RS.40,00,000/ - TO BE INADVERTENT. BOTH THE APPELLATE AUTHORITIES HELD, AFTER CONSIDERING ALL THE FACTS, THAT THE ASSESSEE HAD INADVERTENTLY CLAIMED A DEDUCTION OF RS.20,00,000/ - PAID AFTER THE END OF THE YEAR IN QUESTION. WE SEE NO REASON TO INTERFERE WITH THIS FINDING. WE SEE LESS REASON TO INTERFERE WITH THE EXERCISE OF DISCRETION BY THE APPELLATE AUTHORITIES IN PERMITTING THE RESPONDENT TO RAISE THIS CLAIM. THAT THE RESPONDENT IS ENTITLED TO THE DEDUCTION IN LAW IS ADMITTED AND, IN ANY EVE NT, CLEARLY ESTABLISHED. IN THE CIRCUMSTANCES, THE RESPONDENT OUGHT NOT BE PREJUDICED. 19. THE ORDERS OF THE CIT(A) AND THE TRIBUNAL CLEARLY INDICATE THAT BOTH THE APPELLATE AUTHORITIES HAD EXERCISED THEIR JURISDICTION TO CONSIDER THE ADDITIONAL CLAIM AS THEY WERE ENTITLED TO IN VIEW OF THE VARIOUS JUDGMENTS ON THE ISSUE, INCLUDING THE JUDGMENT OF THE SUPREME COURT IN NATIONAL THERMAL POWER CORPORATION LIMITED. THIS IS CLEAR FROM THE FACT THAT THESE JUDGMENTS HAVE BEEN EXPRESSLY REFERRED TO IN DETAIL BY TH E CIT(A) AND BY THE TRIBUNAL. ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 14 OF 32 IN VIEW OF THE FACTS AND CIRCUMSTANCES, WHERE THE CLAIM OF THE ASSESSEE RAISED DURING THE ASSESSMENT PROCEEDINGS AND FURTHER BEFORE THE CIT(A) IS IN THE NATURE OF INTERPRETATION OF PROVISIONS AS WELL AS THE SCHEME OF THE STATE GOVERNMENT UNDER WHICH SUBSIDY WAS PROVIDED AND THEREFORE NO FACTS WERE REQUIRED TO BE INVESTIGATED OR VERIFIED FOR DETERMINING THIS NEW PLEA/ADDITIONAL CLAIM RAISED BY THE ASSESSEE. ACCORDINGLY, IN VIEW OF THE ABOVE JUDGMENT OF THE HON'BLE JURISDIC TIONAL HIGH COURT WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) IN ENTERTAINING THE CLAIM OF THE ASSESSEE . 5.6 AS REGARDS MERITS OF THE CLAIM, WE FIND THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHAPHALKAR BROS. (SUPRA) HAD THE OCC ASION TO CONSIDER THE SCHEME OF THE STATE GOVERNMENT UNDER WHICH THE ENTERTAINMENT TAX SUBSIDY HAS BEEN GIVEN TO THE ASSESSEE FOR CONSTRUCTION OF MULTIPLEX. THE HON'BLE JURISDICTIONAL HIGH COURT, AFTER CONSIDERING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEELS LTD. VS. CIT (SUPRA) AS WELL AS PONNI SUGARS AND CHEMICALS LTD (SUPRA) HAS DECIDED THIS ISSUE AS UNDER: 2. ACCORDING TO THE REVENUE, IN THE LIGHT OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF SAHN E Y STEEL AND PRESS WORKS LIMITED V/S. COMMISSIONER OF INCOME TAX REPORTED IN (1997) 228 ITR 253 (SC), THE ENTERTAINMENT DUTY SUBSIDY RECEIVED BY THE ASSESSEE MUST BE HELD TO BE REVENUE RECEIPT BECAUSE, THE SUBSIDY IS GRANTED AFTER THE COMMENCEMENT ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 15 OF 32 BUSINESS AND AFTER THE ENTERTAIN DUTY IS COLLECTED BY THE ASSESSEE. 3. THE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. PONNI SUGARS AND CHEMICALS LIMITED REPORTED IN (2008) 306 ITR 392)(SC) HAS ON CONSIDERATION OF ITS DECISION IN THE CASE OF SAHNEY STE EL (SUPRA) HELD THUS: .. THE IMPORTANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYSED 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 THE 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 MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR REPAY MENT 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 ACC OUNT. THUS, THE PURPOSES FOR WHICH THE SUBSIDY WAS GIVEN IS RELEVANT FACTOR AND IF THE OBJECT OF SUBSIDY WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT THEN THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. 4. IN THE PRESENT CASE, AS NOTED BY THE TRIBUNAL, THE OBJECT OF GRANTING ENTERTAINMENT DUTY SUBSIDY BY THE STATE GOVERNMENT WAS AS FOLLOWS: '1. AS A RESULT OF THE ONSLAUGHT OF CABLE TELEVISION AND ADVERTISEMENT IN THE FIELD OF INFORMATION TECHNOLOGY, THE AVERAGE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 16 OF 32 OCCUP ANCY IN CINEMA THEATRE HAS FALLEN CONSIDERABLY AND HARDLY ANY NEW THEATRES HAVE BEEN STARTED IN THE RECENT PAST. PUBLIC AT LARGE THESE DAYS PREFER TO SEE MOVIES AT HOME. KEEPING IN VIEW THIS SCENARIO, A CONCEPT OF COMPLETE FAMILY ENTERTAINMENT CENTRE, MORE POPULARLY KNOWN AS MULTIPLEX THEATRE COMPLEX HAS MERGED. THESE MULTIPLEX THEATRE COMPLEXES OFFER VARIOUS ENTERTAINMENT FACILITIES FOR THE ENTIRE FAMILY UNDER SINGLE ROOF. HOWEVER, THESE COMPLEXES ARE HIGHLY CAPITAL INT ENSIVE, THEIR GESTATION PERIOD IS ALSO QUITE LONGER AND THEREFORE, NEED GOVERNMENT SUPPORT AND INCENTIVE IN ENTERTAINMENT DUTY. 2. GOVERNMENT HAS, THEREFORE, WITH A VIEW TO COMMEMORATE BIRTH CENTENARY OF CHITRAPATI LATE V.SHANTARAM, DECIDED TO GRANT CON CESSION IN ENTERTAIN DUTY TO MULTIPLEX THEATRE COMPLEXES TO PROMOTE CONSTRUCTION OF NEW CINEMA HOUSES IN THE STATE. 5. SINCE THE OBJECT OF SUBSIDY WAS TO PROMOTE CONSTRUCTION OF MULTIPLEX THEATRE COMPLEXES, IN OUR OPINION, RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT, THE FACT THAT THE SUBSIDY WAS NOT MEANT FOR REPAYING THE LOAN TAKEN FOR CONSTRUCTION OF MULTIPLEXES CANNOT BE A GROUND TO HOLD THAT SUBSIDY RECEIPT WAS ON REVENUE ACCOUNT, BECAUSE, IF THE OBJECT OF THE SCHEME WAS TO PROMOTE CINEMA HOUSES BY CONSTRUCTING MULTIPLEX THEATRES, THEN IRRESPECTIVE OF THE FACT THAT THE MULTIPLEXES HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS, THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT. IN THE LIGHT OF THE AFORESAID OBJECTS OF THE SCHEME FRAMED BY THE STATE GOVERNMENT, THE DECISION OF THE INCOME TAX APPELLATE TRIBUNAL THAT THE AMOUNT OF SUBSIDY RECEIVED BY THE ASSESSEE IS ON CAPITAL ACCOUNT CANNOT BE FAULTED. ACCORDINGLY, BOTH THE APPEAL S ARE DISMISSED WITH NO ORDER AS TO COSTS. ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 17 OF 32 5.7 THOUGH THE LEARNED DR HAS RAISED A PERTINENT ISSUE THAT THE SUBSIDY IN THIS CASE WAS GIVEN TO ENABLE THE ASSESSEE TO RUN THEIR BUSINESS OF MULTIPLEXES MORE PROFITABLY AND THEREFORE HE HAS SUPPORTED HIS CONTENTION BY THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF PONNI SUGARS AND CHEMICALS LTD (SUPRA) HOWEVER, AS IT IS APPARENT THAT THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DECIDING THE ISSUE OF SUBSIDY UNDER THE SAME SCHEME HAS CONSIDERED BOTH THE JUDGMENTS OF THE HON'BLE SUPREME COURT IN THE CA SE OF SAHNEY STEELS LTD. (SUPRA) AS WELL AS PONNI SUGARS AND CHEMICALS LTD (SUPRA). THEREFORE, IN VIEW OF THE BINDING PRECEDENT OF HON'BLE JURISDICTIONAL HIGH COURT, WE HOLD THAT ENTERTAINMENT DUTY/TAX SUBSIDY RECEIVED BY THE ASSESSEE IS ON CAPITAL ACCOUNT AND THEREFORE, NOT TAXABLE INCOME OF THE ASSESSEE. 6. IN THE ASSESSEES APPEAL, THE ONLY ISSUE IS AGAINST THE DIRECTIONS GIVEN BY THE CIT(A) THAT THE BENEFIT OF SUBSIDY RECEIVED BY THE ASSESSEE HAS TO BE REDUCED FROM THE COST OF THE MULTIPLEX/PLANT AND MACHINERY F O R THE PURPOSE OF ALLOWING DEPRECIATION. 6.1 WE HAVE HEARD THE LEARNED AR OF THE ASSESSEE AS WELL AS THE LEARNED DR AND CONSIDERED THE RELEVANT MATERIAL ON RECO RD. LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN A SERIES OF ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 18 OF 32 DECISIONS AND IT HAS BEEN HELD THAT THE SUBSIDY ON ACCOUNT OF ENTERTAINMENT TAX CANNOT BE REDUCED FROM THE COST OF THE ASSET. HE HAS RELIED UPON THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S PVR LTD. VS. ADDL. CIT IN ITA NO.1897/DEL/2010 DATED 20/4/2012 AS WELL AS THE DECISION OF THE AHMADABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S.INOX LEISURE LTD. VS. DCIT IN ITA 272 & 273/AHD/2010 DATED 5 /8/2014 . 6.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S PVR LTD. VS. ADDL. CIT (SUPRA) AND IT WAS HELD THAT ENTERTA INMENT SUBSIDY WAS FOR PROMOTION OF CINEMA/MULTIPLEX INDUSTRY AND WILL NOT MEAN TO REDUCE THE COST OF THE ASSET DIRECTLY OR INDIRECTLY IN TERMS OF EXPLANATION 10 TO SEC.43(1). WE FURTHER NOTE THAT BY FOLLOWING THE SAID DECISION OF THE DELHI BENCH OF THE T RIBUNAL IN THE CASE OF M/S PVR LTD. VS. ADDL. CIT (SUPRA), AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S.INOX LEISURE LTD. VS. DCIT (SUPRA) HAS TAKEN A SIMILAR VIEW. SINCE THE ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE ABOVEMENTIONE D CASES, AND IN ABSENCE OF ANY CONTRARY DECISION BROUGHT TO OUR NOTICE THEREFORE, TO MAINTAIN CONSISTENCY, WE FOLLOW THE FINDING OF THE TRIBUNAL IN THE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 19 OF 32 ABOVEMENTIONED CASES AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. THE CIT(A)S FINDING ON THIS ISSU E IS SET ASIDE. 7. FOR THE ASSESSMENT YEAR 2006 - 07, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS. 1. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI HAS ERRED IN TREATING PRINTERS A PART OF THE BLOCK OF COMPUTERS ELI GIBLE FOR DEPRECIATION @ 60% INSTEAD OF TREATING THE SAME AS PLANT AND MACHINERY ELIGIBLE FOR DEPRECIATION @ 15%. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) MUMBAI ERRED IN CLASSIFYING VARIOUS ITEMS OF WORK SUCH AS TILING, POP, PAINTING TICKETS AND F&B COUNTERS, TOILETS FITTINGS ETC. AS A BUILDING BLOCK AND NOT PLANT AND MACHINERY AND THE EXPENSES ON ACOUSTIC ITEMS OF SOUND PROOF DOORS AND FITTINGS AS PLANT AND MACHINERY AND DIRECTING THE AO TO ALLOW DEPRECIATION AT RESPECTIVE RATES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI ERRED IN ENTERTAINING THE CLAIM OF ENTERTAINMENT TAX REBATE OF THE ASSESSEE AND THEREAFTER ALLOWING IT BY HOLDING IT TO BE A CAPITAL RECEIPT WHEN THE CLAIM OF SUCH DEDUCTION WAS MADE FOR THE FIRST TIME DURING THE COURSE OF ASSESSMENT AND MOREOVER WHEN THE TIME TO FILE A REVISED RETURN HAD ALREADY LAPSED. RELIANCE IS PLACED ON HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA 284 ITR 323. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI ERRED IN HOLDING THE REBATE OF ENTERTAINMENT TO BE RECEIPT WHICH IS OF A CAPITAL NATURE WHEN THE FIRST PARAGRAPH OF THE SCHEME STATES THAT THE IDEA OF GIVING BENEFIT TO THE MULTIPLEX THEATRE OWNERS IN THE FORM OF INCENTIVE IN ENTERTAINMENT TAX WAS BECAUSE OF ONSLAUGHT OF CABLE TELEVISION AND ADVANCEMENT IN THE FIELD OF INFORMATION TECHNOLOGY, PUBLIC AT LARGE STARTED PREFERRING TO WATCH MOVIES AT HOME, THEREBY RESULTING IN ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 20 OF 32 AVERAGE OCCUPANCY IN CINEMA THEATRES TO FALL AND CONSEQUENTLY REDUCING THE REVENUE INFLOW OF THEATRE OWNERS. THE SPIRIT AND INTENT OF THIS SCHEME IS VERY MUCH CLEAR THAT IT INTENDS TO BOOST UP THE REVENUE OF THEATRE OWNERS AND WHEN SUCH IS THE CASE IT CAN BE CLEARLY SAID THAT THE IMPUGNED SUBSIDY GRANTED BY THE MAHARASHTRA GOVERNMENT TO THE MULTIPLEX THEATRE OWNERS WAS IN SUBSTANCE TO PR OVIDE STABILITY TO THEIR REVENUE. RELIANCE IS PLACED ON THE HON'BLE APEX COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. 228 ITR 253 HAS HELD THAT IF THE TYPE OF SUBSIDY BY THE GOVERNMENT IS TO GIVE RUNNING SUPPORT TO HOLD STABILITY OF THE REVENUE OF THE UNIT, THE SUBSIDY WILL BE REVENUE NATURE. 5. THE APPELLANT PRAYS THAT THE ORDER OF CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND W HICH MAY BE NECESSARY.' GROUND NO.1 RE. DEPRECIATION ON PRINTER AT A HIGHER RATE OF 60%. 8. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEARNED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SARASWAT INFOTECH LTD. IN ITA NO.1243 OF 2012 WHEREIN THE HONBLE HIGH COURT HAS CONSIDERED AN IDENTICAL ISSUE IN PARAS.5 & 6 AS UNDER: 5) IN SECOND APPEAL, THE TRIBUNAL BY ITS ORDER DATED 14/3/2012 HELD THAT UPS IS AN INTEGRAL PART OF THE COMPUTER SYSTEM AND REGULATE THE FLOW OFF, TO AVOID ANY KIND OF DAMAGE TO THE COMPUTER NETWORK DUE TO FLUCTUATION IN ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 21 OF 32 POWER SUPPLY WHICH COULD LEAD TO LOSS OF VALUABLE D ATA. THE TRIBUNAL RELIED UPON THE DECISION OF THE DELHI HIGH COURT DATED 20/1/2011 IN THE MATTER OF CIT V ORIENT CERAMICS AND INDUSTRIES LTD. IN WHICH UPS WAS HELD TO BE THE PART OF THE COMPUTER SYSTEM AND DEPRECIATION AT 60% WAS ALLOWED. SIMILARLY, SO FAR AS ATMS ARE CONCERNED, THE TRIBUNAL ON FINDING OF FACT CONCLUDED THAT ATM CANNOT FUNCTION WITHOUT THE HELP OF COMPUTER AND WOULD BE A PART OF THE COMPUTER IN THE BANKING INDUSTRY. RELIANCE WAS PLACED BY THE TRIBUNAL U PON THE DECISION THE DELHI BENCH OF TRIBUNAL IN THE MATTER OF DCIT V. GLOBAL TRUST BANK (ITA NO.474/D/09) WHEREIN IT HAS BEEN HELD THAT ATM WAS A COMPUTER EQUIPMENT AND DEPRECIATION @ 60% WAS ALLOWED. SO FAR AS THE USE OF SOFTWARE IS CONCERNED, THE TRIBUNA L RECORDS A FACT THAT THE EVIDENCE OF THE USE OF THE SOFTWARE ON 31/3/2008 WAS PRODUCED BEFORE THE TRIBUNAL. THUS, THE TRIBUNAL HELD THAT DEPRECIATION @ 30% ON SOFTWARE WAS RIGHTLY CLAIMED. 6) WE NOTE THAT THE TRIBUNAL HAS ARRIVED AT A FINDING OF FACT ON ALL THE THREE QUESTIONS. THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT THE ABOVE FINDING OF FACT IS PERVERSE. THUS, WE DO NOT SEE ANY REASON TO ENTERTAIN QUESTION (I), (II) AND (III) ABOVE. THUS IT IS CLEAR THAT ANCILLARIES OF COMPUTER ARE CONSIDERED AS PART OF THE COMPUTER SYSTEM AND THEREFORE DEPRECIATION AT THE RATE OF 60% WAS ALLOWED. AN IDENTICAL ISSUE WAS ALSO CONSIDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BSES YAMUNA POWERS LTD . IN ITA NO.1267/2010 DATED 31/8/2010 WHEREIN THE H ONBLE HIGH COURT HAS UPHELD THE ORDER OF THE TRIBUNAL IN ALLOWING DEPRECIATION AT THE RATE OF ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 22 OF 32 60% ON COMPUTER PERIPHERALS AND ACCESSORIES IN PARA.3 & 4 AS UNDER: 3. HOWEVER, UPON A PERUSAL OF THE FILE, WE FIND THAT THE HIGHER RATE OF DEPRECIATION WAS AL LOWED BOTH BY THE COMMISSIONER OF INCOME TAX (APPEALS) 'CIT(A)'] AND THE TRIBUNAL. IN FACT, THE TRIBUNAL IN ITS IMPUGNED ORDER HAS OBSERVED AS UNDER : - 'THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF COORDINATE OF THE TRIBUNAL AS DISCUSSED BELOW: - IN THE CASE OF ITO VS. SAMIRAN MAJUMDAR (2006) 98 ITD 119 (KOL.), ITAT TATA BENCH B , HAS TAKEN A VIEW THAT THE PRINTER AND SCANNER ARE INTEGRAL PART OF THE COMPUTER SYSTEM AND ARE TO BE TREATED A S COMPUTER FOR THE PURPOSE OF ALLOWING HIGHER RATE OF DEPRECIATION, I.E., 60%. 3.2 THE ITAT, DELHI F BENCH IN THE CASE OF EXPEDITORS INTERNATIONAL ( INDIA) (P) LTD. VS. LD. CIT REPORTED IN (2008) 118 TTJ 652 HAS HELD THAT PERIPHERALS SUCH AS PRINTER, SCA NNERS, NT SERVER, ETC. FORM INTEGRAL PART OF THE COMPUTER AND THE SAME, THEREFORE, ARE ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60% AS APPLICABLE TO A COMPUTER. 4. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE COORDINATE BENCH, WE UPHOLD THE ORDER OF LD CIT(A) IN ALLOWING THE DEPRECIATION AT 60% ON COMPUTER PERIPHERALS AND ACCESSORIES, AND, THUS, THE GROUND RAISED BY THE REVENUE IS REJECTED. ACCORDINGLY, BY FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS THE HONBLE DEL HI HIGH COURT SUPRA, WE UPHOLD THE ORDER OF THE CIT(A) QUA THE ISSUE IN ALLOWING DEPRECIATION AT THE RATE OF 60% ON PRINTER. 9. GROUND NO.2 IS REGARDING DEPRECIATION ON TILING, PAINTING, POP ETC. THE ASSESSEE HAS TAKEN CERTAIN OLD THEATRE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 23 OF 32 BUILDING ON LEASE AND HAS CONVERTED THEM INTO MULTIPLEXES BY SPENDING SUBSTANTIAL AMOUNT OF MONEY. AO NOTICED THAT THE ASSESSEE HAS CLAIMED STRUCTURAL WORKS BOTH UNDER THE HEAD PLANT & MACHINERY AS WELL AS FURNITURE AND FIXTURES. AO TREATED THE PLUMBING AND ELEC TRICAL WORK AS PART OF THE BUILDING AND THEREFORE ALLOWED DEPRECIATION AT THE RATE OF 10% INSTEAD OF 15% CLAIMED BY THE ASSESSEE. 9.1 THE A SSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) HAS HELD THAT THE WORK OF TILING, POP, PAIN TING , TICKETS AND F&B COUNTERS ARE NOT IN THE NATURE OF PLANT & MACHINERY AND THEREFORE DEPRECIATION AT THE RATE OF PLANT AND MACHINERY WAS NOT ALLOWABLE. HOWEVER, EXPENSES ON ACOUSTIC ITEMS OF SOUND PROOF DOORS AND FITTINGS ARE HELD AS PLANT AND MACHINER Y AND DEPRECIATION ON WHICH WAS ALLOWED AS APPLICABLE TO PLANT & MACHINERY . A CCORDINGLY, THE CIT(A) HAS ALLOWED PART RELIEF TO THE ASSESSEE. 9.2 WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEARNED AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE CIT(A) HAS PROPERLY DISTINGUISHED AND SEGREGATED THE TWO TYPES OF EXPENDITURE INCURRED BY THE ASSESSEE DIRECTLY RELATED TO BUILDING STRUCTURE INCLUDING IN THE NATURE OF PAINTING AND CONSTRUCTION OF THE STRUCTURE OF TOILET FITTINGS ETC., WHICH IS CLEARLY PART AND PARCEL OF THE BUILDING ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 24 OF 32 STRUCTURE AND THEREFORE ELIGIBLE FOR DEPRECIATION ALLOWABLE ON THE BUILDING AND NOT PLANT AND MACHINERY. THE CIT(A) HAS FURTHER NOTED THAT EXPENSES OF ACOUSTIC NATURE LIKE SOUND PROOF DOOR, FITTINGS ARE IN THE NATURE OF PLANT & MACHINERY AND ACCORDINGLY THE CLAIM OF THE ASSESSEE WAS ALLOWED TO THE SAID EXPENDITURE. 9.3 WE FIND THAT S O FAR AS THE WORK WHICH REQUIRES SPECIFIC NATURE OF EQUIPMENT AND APPLIANCES FOR MAKING THE INTERIOR OF THE MULTIPLEX SOUND PROOF AS WELL AS OTHER FITTINGS FOR MAKING MULTIPLEX FUNCTIONAL WOULD CLEARLY FALL IN THE AMBIT OF PLANT AND MACHINERY AND THEREFORE , WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. GROUND NO.3 : RE GARDING CLAIM OF ENTERTAINMENT TAX REBATE: 10. THIS ISSUE IS COMMON TO THE GROUND NO.1 OF THE ASSESSEE S APPEAL AND WE HAVE ALREADY DECIDED THIS ISSUE AL ONG WITH GROUND NO.1 OF THE ASSESSEES APPEAL. ACCORDINGLY, THIS GROUND OF THE REVENUE IS DISMISSED. 11. FOR THE ASSESSMENT YEAR 2007 - 08, BOTH ASSESSEE AND DEPARTMENT HAVE RAISED COMMON GROUND REGARDING DISALLOWANCE U/S 14A WHICH READS AS UNDER: ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 25 OF 32 BY THE ASSESSEE: 1. THE HON'BLE CIT - (APPEAL) 3, MUMBAI, SERIOUSLY ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IN CONFIRMING THE ACTION OF THE AO IN INVOKING RULE 8D, WHILE ALLEGEDLY APPLYING THE PROVISIONS OF SECTION 14A, THOUGH THE LE ARNED AO HAS NOT RECORDED ANY 'DIS - SATISFACTION', HAVING REGARD TO THE ACCOUNTS OF YOUR APPELLANT, SO FAR AS IT RELATES TO THE CORRECTNESS OF THE CLAIM OF YOUR APPELLANT, IN RESPECT OF THE ALLEGED EXPENDITURE, IN RELATION TO INCOME WHICH, DOES NOT FORM PAR T OF THE TOTAL INCOME. THE PROVISIONS OF SECTION 14A R.W. RULE 8D ARE NOT ATTRACTED AT ALL, ON THE FACT AND CIRCUMSTANCES OF THE CASE AND AS SUCH, THE ENTIRE DISALLOWANCE SUSTAINED BE DELETED. WITHOUT PREJUDICE TO THE ABOVE MAIN GROUND: 2. THE HON'BLE CIT - (APPEAL) 3, MUMBAI, SERIOUSLY ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IN NOT RESTRICTING THE DISALLOWANCE ON ACCOUNT OF ALLEGED INTEREST EXPENDITURE, UPHELD, AS PER THE WORKING SUPPLIED BY YOUR APPELLANT, AT RS .7,94,7401 - TO THE EXTENT OF THE EXEMPTED INCOME SHOWN BY YOUR APPELLANT AT RS. 3,95,556/ - THE ALLEGED DISALLOWANCE, AT THE MOST, BE RESTRICTED TO EXEMPTED INCOME BY THE DEPARTMENT: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) MUMBAI HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION U/S.14A OF THE INCOME - TAX ACT, 1961 IGNORING THE FACT THAT THE ASSESSEE HAS EARNED ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 26 OF 32 EXEMPTED INCOME AND HAS INCURRED DIRECT AND INDIRECT EXPENSES TO EARN THE SAID EXEMPTED INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) MUMBAI FAILED TO APPRECIATE THE FACT THAT THE AMOUNT DISALLOWED BY THE AO IS THE SAME THAT THE ASSESSEE HI MSELF OFFERED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE PRODUCED BEFORE THE LD. CIT (A) NEW FACTS AND HAS REVISED HIS OWN COMPUTATION WHICH IS DIFFERENT TO WHAT WAS GIVEN TO THE AO ON THE BASIS OF WHICH THE AO HAD MADE THE DISALLOWANCE. HENCE, THE NE W FACTS AND COMPUTATION WHICH IN APPEAL BEFORE THE CIT (A) IS QUITE CONTRARY TO THE FACTS AND COMPUTATION PRODUCED DURING THE ASSESSMENT PROCEEDINGS IS NOT MAINTAINABLE AND SHOULD NOT HAVE BEEN CONSIDERED BY THE LD. CIT (A). 3. THE APPELLANT PRAYS THAT THE OR DER OF CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' THIS ISSUE IS COMMON AND IDENTICAL TO THE ISSUE RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07. ACCORDINGLY THIS ISSUE INVOLVING IN THE APPEAL OF THE ASSESSEE AS WELL AS THE REVENUE HAS BEEN DISPOSED OF IN THE SAME TERMS AS DECIDED FOR THE ASSESSMENT YEAR 2006 - 07. 12. FOR THE ASSESSMENT YEAR 2008 - 09, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF APPEALS - 3. MUMBAI, ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 27 OF 32 ERRED IN CONFIRMING THE ADDITION AND OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IN RESPECT OF THE FOLLOWING POINTS. HE ERRED: 1. IN CONFIRMING THAT FOREIGN EXCHANGE FLUCTUATION GAIN OF RS, 646,29,9761 - IN RESPECT OF FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB) IS A REVENUE RECEIPT LIABLE TO TAX 2. IN NOT APPRECIATING THAT PROCEEDS OF FCCB WERE MAINLY UTILIZED IN CAPITAL FIELD 3. WITHOUT PREJUDICE TO ABOVE, IN NOT APPRECIATING THAT THE EXCHANGE FLUCTUATION GAIN OF RS. 34,67,709/ - IS ALREADY REDUCED FROM THE COST OF THE FIXED ASSETS U/S 43A AND HENCE IS REQUIRED TO BE EXCLUDED FROM THE TOTAL AMOUNT OF RS. 6,46,29,976 CONSIDERED AS REVENUE RECEIPT. 4. THE APPELLANT CRAVES LEAVE TO ADD TO, WITHDRAW OR MODIFY ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. 13. THE ONLY ISSUE THAT ARISES FROM THE GROUNDS RAISED BY THE ASSESSEE IS REGARDING TREATMENT OF FOREIGN EXCHANGE FLUCTUATION GAIN. 13.1 THE ASSESSEE HAS EARNED NET FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.7,64,81,864/ - OUT OF WHICH FOREIGN EXCHANGE FLUCTUATION GAIN PERTAINING TO CAPITAL ASSET PURCHASED ABROAD HAS BEEN ADJUSTED AS PER 40A OF THE ACT. THE ASSESSEE TREATED FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.6,46,29,976/ - FROM MONEY USED FOR PURCHASE OF CAPITAL ASSET AND TREATED THE SAME AS CAPITAL RECEIPT EXEMPT FROM TAX. AO OBSERVED THAT FO REIGN CURRENCY CONVERTIBLE BONDS (FCCB) ARE PURE LOANS. FCCD HAVE AN INBUILT OPTION FOR LENDER TO CONVERT BONDS INTO EQUITY. AO ACCORDINGLY ASKED THE ASSESSEE AS TO WHY SUCH ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 28 OF 32 FOREIGN EXCHANGE FLUCTUATION GAIN OF FCCB SHOULD NOT BE TREATED AS RECEIPTS WHIC H IS REVENUE IN NATURE. ASSESSEE OBJECTED TO THE SAID SHOW CAUSE NOTICE OF THE AO AND CONTENDED THAT THE LOAN WAS UTILIZED FOR CAPITAL EXPENDITURE IN INDIA AND THEREFORE FLUCTUATION GAIN OF SUCH AMOUNT IS CAPITAL IN NATURE. AO DID NOT ACCEPT THE CONTENT ION OF THE ASSESSEE. HE HELD THAT EVEN IF THE ASSESSEE UTILIZES THE SAID MONEY FOR PURCHASE OF CAPITAL BONDS IN INDIA , THE ASSESSEE HAS NOT REDUCED THE COST OF ASSET BY THE AMOUNT OF FLUCTUATION GAIN. SINCE THE AO HAS TREATED FCCB AS NOT LOAN HAVING INBUI LT OPTION FOR THE LENDER TO CONVERT THEM INTO EQUITY, THEREFORE AO HAS DISTINGUISHED THE JUDGMENTS RELIED UPON BY THE ASSESSEE ON THIS POINT. ACCORDINGLY, AO HELD THAT FOREIGN EXCHANGE FLUCTUATION GAIN OF RS.6,46,29,976/ - AS REVENUE RECEIPT. ALTERNATIVELY AO HAS HELD THAT SUCH GAIN, IF TREATED AS CAPITAL IN NATURE, IT SHOULD GO TO REDUCE THE COST OF THE ASSET AS PER THE DEFINITION OF ACTUAL COST U/S 43A . 13.2 THE A SSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) OBSERVED THAT FCC B, WHEN ISSUED IS A LOAN, WHETHER CONVERTIBLE OR NOT INTO EQUITY SHARES AND THEREFORE EXPENDITURE INCURRED ON THE ISSUE OF FCCB IS REVENUE IN NATURE. APPLYING THE SAME ANALOGY, CIT(A) WAS OF THE OPINION THAT FCCB ARE LOAN AND FOREIGN EXCHANGE FLUCTUATION GAIN WOULD BE ON REVENUE ACCOUNT AND ACCORDINGLY CHARGEABLE ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 29 OF 32 TO TAX AS REVENUE RECEIPT. THE CIT(A) HAS FURTHER RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD. (294 ITR 451) WHICH HAS BEEN AF FIRMED BY THE HON'BLE SUPREME COURT WHEREIN IT WAS HELD THAT THE LIABILITY ARISING OUT OF CONTRACT HAD ALREADY STOOD ACCRUED AND THE MERE POSTPONEMENT OF PAYMENT OF SUCH LIABILITY TO A FUTURE DATE WOULD NOT EXTINGUISH THE SAME SO AS TO RENDER IT NOTIONAL OR CONTINGENT. IT WAS ALSO HELD THAT ANY INCREASE IN SUCH LIABILITY AS A RESULT OF FLUCTUATION IN THE VALUE OF FOREIGN CURRENCY IN RELATION TO INDIAN CURRENCY THUS WAS AND FATE - ACCOMPLI AND SUCH INCREASE IN LIABILITY AS PER THE EXCHANGE RATE PREVAILING ON THE LAST DATE OF THE FINANCIAL YEAR WAS ALLOWABLE AS DEDUCTION BEING NOT NOTIONAL OR CONTINGENT. THE CIT(A) HAS ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT DATED 15/03/2010 IN THE CASE OF ONGC VS. CIT . ACCORDIN GLY, CIT(A) HAS CONFIRMED THE ACTION OF THE AO. 13.3 BEFORE US, LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT FOREIGN EXCHANGE FLUCTUATION GAIN ON THE AMOUNT WHICH IS UTILIZED ON CAPITAL ACCOUNT HAS TO BE TREATED AS CAPITAL GAINS NOT LIABLE TO TAX. I N SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. V.S.DEMPO & CO.LTD. (291 ITR 205). IT ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 30 OF 32 WAS SUBMITTED THAT W HEN THE ENTIRE AMOUNT OF LOAN WAS RECEIVED BY THE ASSESSEE WAS USED FOR CAPITAL EXPENDITURE, THEN FOREIGN EXCHANGE FLUCTUATION GAIN ON SUCH LOAN WILL BE ON CAPITAL ACCOUNT AND NOT LIABLE TO TAX. 13.4 ON THE OTHER HAND, LEARNED DR HAS SUBMITTED THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD (312 ITR 254). 13.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS THE ISSUE OF TREATMENT OF FLUCTUATION GAIN IN RESPECT OF LOAN UTILIZED FOR ACQUIRING THE CAPITAL ASSET IS CONCERNED, IT IS NOW SETTLED PROPOSITION OF LAW THAT T HE SAID GAIN WOULD BE ADJUSTED AGAINST THE COST OF THE CAPITAL ASSET ACQUIRED BY THE ASSESSEE. THEREFORE, TO THE EXTENT OF FLUCTUATION GAIN IN RESPECT OF THE AMOUNT USED FOR ACQUISITION OF THE CAPITAL ASSET, THE ISSUE IS COVERED BY THE JUDGMENT OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD (SUPRA) . ACCORDINGLY, WE MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE AO TO REDUCE THE AMOUNT OF FOREIGN EXCHANGE FLUCTUATION GAIN FROM THE CORRESPONDING COST OF THE C APITAL ASSET FOR THE PURPOSE OF ALLOWING DEPRECIATION. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 31 OF 32 14. FOR THE ASSESSMENT YEAR 2008 - 09 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) - 3, MUMBAI HAS ERRED IN HOLDING THAT THE ENTERTAINMENT TAX INCENTIVE (SUBSIDY) OF RS. 13,24,10,254/ - WAS A CAPITAL RECEIPT AND HENCE DID NOT FORM PART OF TAXABLE INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) - 3, MUMBAI HAS ERRED IN RELYING ON THE DECISION DATED 08.06.2011 OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT - 1 KOLHAPUR V/S CHAPHALKAR BROTHERS, PUNE IN ITA NOS. 1036 AND 1147 OF 2010, EVEN THOUGH THE INCENTIVE IN THE PRESENT CASE WAS NOT FOR CONSTRUCTION OF MULTIPLEX CINEMA THEATRES BUT FOR PROVIDING FINANCIAL SUPPORT DURING GESTATION PERIOD AFTER CONSTRUCTION OF SUCH THEATRES. 2.1 THE CIT(A) - 3 MUMBAI FAILED TO APPRECIATE THAT THE ASSE SSING OFFI CER HAD DIFFERENTIATED THE JUDG MENT OF THE HON'BLE SUPREME COURT IN CIT VS. PONNI SUGARS AND CHEMICALS LTD. (306 ITR 392) ON FACTS, CLEARLY INDICATING THAT THE SUBSIDY WAS NOT FOR REPAYING TERM LOANS TAKEN FOR ACQUIRING CAPITAL ASSETS BUT FOR DISCHARGING REVENUE OBLIGATIONS. 3. THE APPELLANT PRAYS THAT THE ORDER OF CIT(APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 15. THE ONLY ISSUE ARISES FROM THE GROUNDS RAISED BY THE REVENUE IS REGARDING ENTERTAINMENT TAX SUBSIDY WHETHER CAPITAL RECEIPT OR REVENUE RECEIPT. THIS ISSUE IS COMMON AS IN THE EARLIER ASSESSMENT YEAR. THEREFORE, IN VIEW OF OUR FINDING FOR THE ASSESSMENT YEAR 2006 - 07 THIS GROUND OF REVENUES APPEAL IS DISMISSED. ITA NOS.6046/M/2010 7965/11, M/S.FAME INDIA LTD. PAGE 32 OF 32 16. IN THE RESULT, REVENUES APPEALS FOR ASSESSMENT YEARS 2006 - 07 AND 2008 - 09 ARE DISMISSED AND APPEAL FOR ASSESSMENT YEAR 2007 - 08 IS ALLOWED FOR STATISTICAL PURPOSES. 17. THE ASSESSEES APPEALS FOR ASSESSMENT YEARS 2006 - 07 TO 2008 - 09 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015. SD/ - SD/ - (N.K.BILLAIYA) (VIJAY PAL RAO) ACCOUNANT MEMBER JUDICIAL MEMBER EKSRINIVASULU.SR.PS COPY TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, MUMBAI. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL MUMBAI