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

ITA 8402/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

F IN THE INCO ME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, A M ./I.T.A. NO.8402/M/2011 ( / ASSESSMENT YEAR: 2008 - 2009 ) DCIT - 2(3), R.NO.556, AAYAKAR BHAVAN, MUMBAI. / VS. VISTA ENTERTAINMENT P. LTD., 805, 8 TH FLOOR, 349 BUSINESS POINT, WESTERN EXPRESS HIGHWAY, ANDHERI (E), MUMBAI 400 0 69. ./ PAN : AABCV 5125 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH RANJAN PRASAD / RESPONDENT BY : SHRI ANUJ KISHNADWALA / DATE O F HEARING : 19.9.2013 / DATE OF PRONOUNCEMENT : 25 .9.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 12.12.2011 IS AGAINST THE ORDER OF THE CIT (A) - 6, MUMBAI DATED 22.9.2011 FOR THE AS SESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN TREATING THE RETENTION OF ENTERTAINMENT TAX OF RS. 6,0846, 243/ - COLLECTED BY THE ASSESSEE FROM THE CUSTOMERS AS CAPITAL RECEIPT WITHOUT APPRECIATING THE FACT THAT THE SUBSIDY RECEIVED THEREIN HAD THE CHARACTER OF REVENUE. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF RUNNING OF M ULTIPLEX THEATRE SITUATED AT VERSOVA, MUMBAI . ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 7,25,29,883/ - UNDER NORMAL PROVISIONS. THE RETURN WAS SCRUTINIZED BY THE AO U/S 143(3) OF THE ACT 2 AND DETERMINED THE TO TAL INCOME AT RS. 8,36,49,250/ - . AO MADE VARIOUS ADDITIONS IN THE ASSESSMENT. ONE SUCH ADDITION WHICH IS THE SUBJECT MATTER OF PRESENT APPEAL RELATES TO ADDITION ON ACCOUNT OF ENTERTAINMENT TAX CLAIMED EXEMPTION AMOUNTING TO RS. 6,08,46,243/ - AND FOR W ANT OF FACTS, THE CONTENTS OF PARA 5 OF THE ASSESSMENT ORDER IS RELEVANT IN THIS REGARD. AO TREATED THE SAME AS REVENUE RECEIPT AND REJECTED THE ASSESSEES CLAIM THAT THE PAYMENT OF ENTERTAI NMENT TAX CONSTITUTES CAPITAL RECEIPT . AS PER THE ASSESSEE, STATE GOVERNMENT OF MAHARASHTRA PROVIDED EXEMPTION TO THE ASSESSEE FROM PAYMENT OF ENTERTAINMENT TAX COLLECTED BY THE ASSESSEE AS THE SAME CONSTITUTES A SUBSIDY RECEIVED FROM THE STATE GOVERNMENT AND THE SAME IS MEANT FOR PROMOTION OF CONSTRUCTION OF MULTIPLE X THEATRE. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE RELYING ON VARIOUS DECISIONS I NCLUDING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHAPHALKAR BROTHERS VIDE ITXA NO. 1036 OF 2010 DATED 8.6.2011, WHEREIN IT WAS HELD THAT THE SUBSIDY OF THIS KIND CONSTITUTES CAPITAL RECEIPTS AS IT IS MEANT FOR PROMOTION OF TH E NEW INDUSTRIES BY WAY OF MULTIPLEX THEATRES. CIT (A) ALSO RELIED ON THE OTHER JUDGMENT OF THE JURISDICTIONAL HIGH COURT REPORTED IN 306 ITR 293 AND PARA 4, 4.1 TO 4.5 OF THE CIT (A)S ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF TH E CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE AO. 6. ON THE OTHER HAND, RELYING HEAVILY ON THE ORDER OF THE CIT(A), LD COUNSEL FO R THE ASSESSEE FILED A COPY OF THE SAID JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CHAPHALKAR BROTHERS (SUPRA) AND STATED THAT CONSIDERING THE BINDING NATURE OF THE SAID JUDGMENT, THE ORDER OF THE CIT (A) SHOULD BE APPROVED. 7. WE HAVE HEA RD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE JUDGMENTS CITED BEFORE US. ON HEARING THE BOTH SIDES, WE FIND THAT THE SAID PARAS 4, 4.1 TO 4.5 OF THE CIT (A)S ORDER ARE RELEVANT HERE AND THE SAME READ AS UNDER: 3 4. I HAVE GONE THROUGH THE ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. 4.1. THE BOMBAY HIGH COURT IN CIT VS. CHAPHALKAR BROTHERS , ITXA NO. 1036 OF 2010 (ORDER DATED JUNE, 8, 2011) CONSIDERED THE ISSUE OF SUBSIDY OF ENTERTAINMENT TAX BY GOVERNMENT OF MAHARASHTRA. IT WAS HELD THAT: - (I) A SUBSIDY IS A CAPITAL RECEIPT WHEN IT IS FOR THE PROMOTION OF NEW INDUSTRY, WHILE IT IS A REVENUE RECEIPT LIABLE TO TAX IF IT IS GRANTED TO SUPPLEMENT THE PROFITS OF AN INDUSTRY, (II) THE SUBSIDY GRANTED BY THE STATE GOVERNMENT OF MAHARASHTRA, IS FOR THE PROMOTION OF MULTIPLEXES, (III) THE SUBSIDY WAS GRANTED IN FORM OF A CONCESSION ON ENTERTAINMENT DUTY, (IV) THAT THE OBJECT BEHIND THE SUBSIDY WAS TO PROMOTE CONSTRUCTION OF NEW CINEMA HOUSES, (V) THE STATE GOVERNMEN T HAD DECIDED TO GRANT THE SUBSIDY IN VIEW OF THE FACT THAT SETTING UP NEW MULTIPLEX COMPLEXES IS HIGHLY CAPITAL INTENSIVE, WITH A LONG GESTATION PERIOD. 4.2. THE BOMBAY HIGH COURT ON PONNI SUGARS (SUPRA) , WHERE THE SUPREME COURT HAD EXPLAINED ITS PREVIOU S JUDGMENT IN SAHNEY STEEL AND PRESS WORKS LIMITED VS. CIT, 228 ITR 253 (SC) AS UNDER: THE IMPORTANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYZED THE ENTIRE CASE LAW AND IT HAS LAID DOWN THE BAS IC TEST TO BE APPLIED IN JUDGING THE CHARACTER OF A SUBSIDY. THAT TEST IS THAT CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. I N OTHER WORDS, IN SUCH CASES, O NE HAS T O 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 INC ENTIVE MUST BE UTILIZED FOR PAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS. ON THIS ASPECT THERE IS NO DISPUTE. IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPIT AL ACCOUNT. 4.3. THE BOMBAY HIGH COURT HELD THAT THE RATIO OF PONNI SUGARS (SUPRA) WAS THAT ONLY THE OBJECT OF THE SUBSIDY SCHEME MUST BE CONSIDERED AND THE FACTS OF THE CASE, THE SUBSIDY WAS INTRODUCED WITH THE OBJECT OF PROMOTING THE CONSTRUCTION OF MU LTIPLEXES; AND THE POINT OF TIME IN WHICH IT COULD BE AVAILED THE FOR IN WHICH IT WAS GRANTED WAS NOT RELEVANT. THE BOMBAY HIGH COURT HELD: - THE FACT THAT THE SUBSIDY WAS NOT MEANT FOR REPAYING THE LOAN TAKEN FOR CONSTRUCTION OF MULTIPLEXES CANNOT B E 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 MULTIPLEX HAVE BEEN CONSTRUCTED OUT OF OWN FUNDS OR BORROWED FUNDS, THE RECEIPT OF SUBSIDY WOULD BE ON CAPITAL ACCOUNT . 4.5. FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT AS DISCUSSED ABOVE, GROUND NO. 1 & 2 ARE ALLOWED. GROUND NO. 3 IS GENERAL. 5. THE APPEAL IS ALLOWED. 8. FROMM THE ABOVE, WE FIN D THAT THE CIT(A) EXAMINED THE APPLICABILITY OF THE BINDING JUDGMENTS TO THE FACTS OF THE CASE AND GRANTED RELIEF TO THE ASSESSEE. NO CONTRARY DECISION OF THAT KIND RELEVANT AND APPICABLE TO THE FACTS OF THE PRESENT CASE IS BROUGHT BY THE LD DR BEFORE US. CONSIDERING THE ABOVE SETTLED POSITION OF THE 4 ISSUE, WE ARE OF THE OPINION THAT THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT (A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GRO UND RAISED BY THE REVENUE IS DISMISSED . 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH SEPTEMBER, 2013. SD/ - SD/ - (D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 25 .09.2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI