DCIT (OSD)8(1), MUMBAI V. CINEMAX INDIA LTD, MUMBAI

ITA 8723/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75299 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Keywords: Depreciation; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUN AKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.394/M/2012 (AY: 2008 - 2009) CINEMAX INDIA LTD., ATTRIUM 215, 10 TH FLOOR, NEAR MARRIOT COURT YARD, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI 400 059. / VS. DCIT - 8(1), AAYAKAR BHAVAN, 2 ND FLOOR, NEW MARINE LINES, MUMBAI 400 020. ./ PAN : AACCC 1775 F ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO.8723/M/2011 (AY: 2008 - 2009) DCIT (OSD) - 8(1), AAYAKAR BHAVAN, 2 ND FLOOR, NEW MARINE LINES, MUMBAI 400 020. / VS. CINEMAX INDIA LTD., BUSINESS POINT 349, 8 TH FLR, WESTERN EXPRESS HIGHWAY, ANDHERI (E), MUMBAI 400 069. ./ PAN : AACCC 1775 F ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI ANUJ KISNADWALA / REVENUE BY : SHRI A.C. TEJPAL / DATE OF HEARING : 16.1.2014 / DATE OF PRONOUNCEMENT : 24 . 1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS. BOTH THESE APPEALS ARE FILED AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 24.10.2011 FOR THE AY 2008 - 09. SINCE, THE COMMON ISSUE IS INVOLVED IN BOTH THE APPEALS I.E, THE SUBSIDY CO LLECTED IN THE FORM OF ENTERTAINMENT TAX , THEREFORE , FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXHIBITION OF FILMS, BUILDERS AND DEVELOPERS. DURING THE AY UNDER CONSIDERATION, ASSESSEE COLLECTED RS. 6,98,17,074/ - TOWARDS ENTERTAINMENT TAX 2 AND ASSESSEE GOT EXEMPTION FROM PAYMENT OF THE SAME. DURING THE ASSESSMENT, ASSESSEE CLAIMED THAT THE SAID ENTERTAINMENT DUTY REPRESENTS CAPITAL SUBSIDY AND NOT LIABLE TO BE TAXED AS REVENUE RECEIPT . AO REJECTED THE CLAIM OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAD CONSISTENTLY BEEN SHOWING THE ENTERTAINMENT TAX COLLECTED AS REVENUE RECEIPTS WITHOUT BIFURCATING THE AMOUNT OF ENTERTAINMENT TAX SEPARATELY. THE AO FURTHER HELD THE ENTERTAINMENT T AX WAS COLLECTED BY THE ASSESSEE FOR EXHIBITING THE FILMS WHICH WAS THE BUSINESS OF THE ASSESSEE AND THEREBY TREATED THE SAID RECEIPT AS REVENUE IN NATURE AND ACCORDINGLY BROUGHT THE SAME TO TAX. WITHOUT PREJUDICE TO THE SAID DECISION, THE AO FURTHER HELD THAT THE GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE COST OF THE ASSETS AND HENCE THE ALLEGED AMOUNT OF ENTERTAINMENT TAX COLLECTED HAD TO BE REDUCED FROM THE COST OF ASSET FOR THE PURPOSE OF DEPRECIATION IF IT IS TREATED AS CAPITAL RECEIPT. MATTE R TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, CIT (A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND TREATED THE SAID AMOUNT OF RS.6,98,1 7,074/ - AS CAPITAL RECEIPT AND ACCORDINGLY DELETED THE ADDITION MADE BY THE AO BY RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. CHAPHALKAR BROTHERS VS ITO VIDE ITA NOS.1342& 1443 OF 2006 AND DIRECTED THE AO TO ALLOW THE DE PRECIATION ON THE REDUCED COST OF ASSET. AGGRIEVED WITH THE DECISION OF THE CIT (A) BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 4. DURING THE PROCEEDINGS BEFORE US, SHRI ANUJ KISNADWALA, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. FIRSTLY , ON THE IS SUE RAISED BY THE REVENUE CLAIMING THAT THE ENTERTAINMENT TAX/DUTY COLLECTED BY THE ASSESSEE IS TO BE TREATED AS A REVENUE RECEIPT, IT IS PERTINENT TO MENTION THAT THE CASE OF THE ASSESSEE SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT I N THE CASE OF CIT VS. CHAPHALKAR BROTHERS (SUPRA) , DATED 08.06.2011, WHEREIN IT HAS BEEN HELD THAT THE SUBSIDY OF THIS KIND CONSTITUTES CAPITAL RECEIPTS AS IT IS MEANT FOR PROMOTION OF THE NEW INDUSTRIES BY WAY OF MULTIPLEX THEATRES , IN OUR 3 VIEW, HAS BEEN RIGHTLY FOLLOWED BY THE LD.CIT(A) FOR TREATING THE IMPUGNED AMOUNT AS CAPITAL RECEIPTS . IT IS ALSO RELEVANT TO MENTION THAT THE FACT OF THE ASSESSEES CASE IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSESSEES SISTER CONCERN CA SE NAMELY VISTA ENTERTAINMENT PVT. LTD. IN ITA NO. 8402/MUM/2011 FOR THE ASSESSMENT YEAR 2008 - 09, THE ORDER TO WHICH THE PRESENT AM IS ALSO A PARTY, WHEREIN IT HAS BEEN HELD THAT SIMILAR ADDITIONS ARE NOT SUSTAINABLE SINCE THE SAME AMOUNTS TO CAPITAL IN NA TURE . FOLLOWING THE ABOVE DECISIONS IN THE SIMILAR CONTEXT OF FACTS INVOLVED, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE DECISION OF THE LD. CIT(A) IN TREATING THE IMPUGNED AMOUNT AS CAPITAL RECEIPT AND THE SAME NOT LIABLE TO TAX. ACCORDIN GLY, THE DECISION OF THE LD. CIT(A) ON THIS COUNT IS UPHELD. SIMILAR DECISION ON THIS ISSUE WAS TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE VIDE ITA NO.1287/M/2012 AND 1483/M/2012 FOR THE AY 2009 - 2010. 7. SECONDLY , AS REGARDS THE ISSUE RAISED IN THE A SSESSEES APPEAL REGARDING THE REDUCTION FROM THE WDV OF BLOCK OF ASSET AND TO ALLOW THE DEPRECIATION ON THE REDUCED VALUE OF WDV ACCORDINGLY, IT IS PERTINENT TO MENTION THAT SIMILAR ISSUE HAS BEEN ELABORATELY DISCUSSED BY THE TRIBUNAL IN THE CASE OF M/S. PVR LTD. IN ITA NO. 1897/DEL/2011 , WHEREIN IT HAS BEEN HELD THAT THE AMOUNT OF SUCH SUBSIDY CANNOT BE HELD TO REDUCE THE ACTUAL COST OF ASSETS U/S 43(1) EXPLANATION 10 OF THE ACT . FOR THE SAID DECISION, THE TRIBUNAL IN TURN HAS RELIED ON THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF CIT VS. P.J. CHEMICALS LTD. 210 ITR 830(SC) . SINCE SIMILAR FACTS ARE INVOLVED IN THE ASSESSEES CASE ALSO, FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE AMOUNT OF SUBSIDY CANNOT BE HELD TO REDUCE THE ACTUAL CO ST OF ASSET U/S 43(1) EXPLANATION 10 OF THE ACT. ACCORDINGLY WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. SIMILAR DECISION ON THIS ISSUE WAS TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE VIDE ITA NO.1287/M/2012 AND 1483/M/2012 FOR THE AY 2009 - 2010. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOU NCED IN THE OPEN COURT ON 24 TH JANUARY, 2014. SD/ - SD/ - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 24 - 01 - 2014 4 . . ./ 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