ITO 9(2)(3), MUMBAI V. NIMKO ENTERTAINMENT LTD, MUMBAI

ITA 7042/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3907 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVAJI B GHODE
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 7042/MUM/2014 (ASSESSMENT YEAR:2011-12) ITO-9(2)-3, MUMBAI-20 APPELLANT VS. M/S. NIKMO ENTERTAINMENT LTD. 10 TH FLOOR, 215, ATRIUM, ANDHERI KURLA ROAD, ANDHERI EAST, MUMBAI-400059 RESPONDENT PAN: AABCN9974G /BY APPELLANT : SHRI SHIVAJI B. GHODE, D.R. /BY RESPONDENT : SHRI ANUJ KISNADWALA, A.R. /DATE OF HEARING : 03.08.2016 /DATE OF PRONOUNCEMENT : 08.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-20, MUMBAI, DA TED 22.09.2014 FOR A.Y. 2011-12 ON FOLLOWING GROUND: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING ENTERTAINMENT DUTY COLLECTED BY THE ASSESSEE AS CAPITAL RECEIPT RELYING ON THE DECISION OF THE HO NBLE BOMBAY COURT IN THE CASE OF CIT VS. CHAPHALKAR ITA NO.7042/MUM/14 A.Y. 11-12 [ITO VS. M/S. NIKMO ENTERTAINMENT LTD.] PAGE 2 BROTHERS WITHOUT APPRECIATING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION AND H AS FILED AN SLP WHICH IS PENDING BEFORE THE HONBLE HONBLE SUPREME COURT? 2. ISSUE BEFORE US IN THIS APPEAL IS LEGITIMATING T HE ENTERTAINMENT DUTY AS CAPITAL RECEIPT. ENTERTAINME NT DUTY COLLECTED BY ASSESSEE HAS BEEN REGARDED AS SUBSIDY BY HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. M/S. CHAPHALKA R BROTHERS IN ITA NO.1036/1147 OF 2010. FURTHER IN A SSESSEES OWN CASE IN A.Y. 2009-10, ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: '3.3 I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTE N SUBMISSIONS OF THE APPELLANT. THE HON'BLE BOMBAY HI GH COURT IN CIT VS CHAPHALKAR BROTHERS (ITXANO.1036 OF 2010 DATED 08.06.2011) CONSIDERED THE ISSUE OF SUBSIDY O F ENTERTAINMENT TAX BY GOVERNMENT OF MAHARASHTRA. IT WAS HELD THAT: (I) A SUBSIDY IS A CAPITAL RECEIPT WHEN IT IS FOR T HE PROMOTION OF A NEW INDUSTRY, WHILE IT IS A REVENUE RECEIPT LIABLE TO TAX IF IT IS GRANTED TO SUPPLEMENT THE PR OFITS OF AN INDUSTRY, (II) THE SUBSIDY GRANTED BY THE STATE OF MAHARASHTR A, IS OR THE PROMOTION OF MULTIPLEXES, (III) THE SUBSIDY WAS GRANTED IN THE FORM OF A CONC ESSION ON ENTERTAINMENT DUTY, (IV) THAT THE OBJECT BEHIND THE SUBSIDY WAS TO PROM OTE CONSTRUCTION OF NEW CINEMA HOUSES', (V) THE STATE GOVERNMENT HAD DECIDED TO GRANT THE SUBSIDY IN VIEW OF THE FACT THAT SETTING UP NEW MUL TIPLEX COMPLEXES IS HIGHLY CAPITAL INTENSIVE, WITH A LONG GESTATION PERIOD. 3.3.1. THE HONBLE BOMBAY HIGH COURT RELIED ON PONNI SUGARS (306 ITR 392) WHERE THE HON'BLE SUPREME COUR T HAD EXPLAINED ITS PREVIOUS JUDGEMENT IN SAHNEY STEE L AND PRESS WORKS LTD VS CIT (228 ITR 253) AS UNDER:- ITA NO.7042/MUM/14 A.Y. 11-12 [ITO VS. M/S. NIKMO ENTERTAINMENT LTD.] PAGE 3 'THE IMPORTANCE OF THE JUDGEMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISC USSED AND ANALYZED THE ENTIRE CASE LAW AND IT HAS LAID DOWN T HE BASIC TEST TO BE APPLIED IN JUDGING THE CHARACTER OF A SU BSIDY. THAT TEST IS THAT THE CHARACTER OF THE RECEIPT IN THE HA NDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE P URPOSE 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 S OURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE A RE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST B E UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNIT S. ON THIS ASPECT THERE IS NO DISPUTE. IF THE OBJECT OF THE SU BSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINE SS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCO UNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UND ER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIP T OF THE SUBSIDY WAS ON CAPITAL ACCOUNT.' 3.3.2. THE HON'BLE BOMBAY HIGH COURT HELD THAT THE RATIO OF PONNI SUGARS WAS THAT ONLY THE OBJECT OF THE SUBSID Y SCHEME MUST BE CONSIDERED AND ON THE FACTS OF THE C ASE, THE SUBSIDY WAS INTRODUCED WITH THE OBJECT OF PROMOTING THE CONSTRUCTION OF MULTIPLEXES; AND THE POINT OF TIME IN WHICH IT COULD BE AVAILED - THE FORM IN WHICH IT WAS GRAN TED - WAS NOT RELEVANT. THE HON'BLE BOMBAY HIGH COURT HELD:- THE FACT THAT THE SUBSIDY WAS NOT MEANT FOR REPAYI NG THE LOAN TAKEN FOR CONSTRUCTION OF MULTIPLEXES CANN OT BE A GROUND TO HOLD THAT SUBSIDY RECEIPT WAS ON REVENUE ACCOUNT, BECAUSE, IF THE OBJECT OF THE SCHEME WAS T O PROMOTE CINEMA HOUSES BY CONSTRUCTING MULTIPLEX THE ATRES, 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. 3.3.3. FOLLOWING THE DECISION OF HON'BLE BOMBAY HIG H COURT AS DISCUSSED ABOVE, THIS GROUND OF APPEAL IS ALLOWE D. ITA NO.7042/MUM/14 A.Y. 11-12 [ITO VS. M/S. NIKMO ENTERTAINMENT LTD.] PAGE 4 2.1 THIS CIT(A) DECISION IS FORTIFIED BY THE DECIS ION OF ITAT B BENCH IN ITA NO.3580/MUM/2012 IN ASSESSEES OWN CAS E FOR A.Y. 2009-10, WHEREIN TRIBUNAL HAS HELD AS UNDER: 6. AFTER CONSIDERING THE IMPUGNED ORDER AND ON PER USAL OF RECORD, WE ARE OF THE OPINION THAT THE LD.CIT(A) IS JUSTIFIED IN HOLDING ENTERTAINMENT DUTY COLLECTED BY THE ASSE SSEE IS A CAPITAL RECEIPT AS IT IS IN CONFORMITY WITH THE DEC ISION OF THE JURISDICTIONAL HIGH COURT. ACCORDINGLY, WE AFFIRM T HE ORDER OF LD. CIT(A) AND DISMISS THE GROUND TAKEN BY THE REVE NUE. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BE HALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWING SAME RE ASONING, WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT (A) WHO HAS HELD THAT ENTERTAINMENT DUTY OF RS.1,98,77,770/- TA XED AS REVENUE RECEIPT WAS RIGHTLY DELETED BY CIT(A). WE UPHOLD THE SAME. 3. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 08 TH DAY OF AUGUST, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 08/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. BY ORDER / , / , ,