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2014 (9) TMI 255 - AT - Income TaxCollection of Entertainment tax is a trading receipt or not - exemption of multiplexes Subsidy received after completion of cinema house and commencement of operation - Capital or revenue in nature Held that:- In respect of Pune multiplex the subsidy was granted by an amendment of section-3 of Bombay Entertainment Duty Act 1923 vide Maharashtra Ordinance No.XXIV of 2001 dated 17/08/2001 in respect of Bombay Entertainments Duty (Amendment) Ordinance, 2001 - In respect of Vadodara Multiplex, the subsidy was granted by Government of Gujarat through New tourism policy 1995 as spelt out by Resolution No.NTP-1095/1983-C dated 20/12/1995 - Both the schemes were identically worded as explained to us and the very purpose was to promote the Cinema Industry relying upon M/s.Chaphalkar Brothers vs. ITO [2013 (6) TMI 73 - BOMBAY HIGH COURT] - it was a benevolent scheme for the benefit to the exhibitors/ multiplex owners - The subsidy was meant to grant economic assistance to set up a multiplex - The subsidy was collected as entertainment duty on sale of tickets - collection was not a trade receipt of the assessee because the entertainment duty was collected on behalf of the Government. It was collected under a specific direction and it was also utilized under those directions - The collection of duty had no nexus with the day-to-day function or running of the multiplex - The collection of the duty was not with an objective to supplement the trade receipt - The subsidy was meant for the recoupment of a capital expenditure already incurred by the assessee - the subsidy was for the promotion of the construction of multiplex theatres, hence it was granted on capital account - the subsidy was not meant for repaying any loan taken for construction of multiplexes - it was to promote cinema houses to construct multiplex theatres - 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 Decided against Revenue. Expenses on professional fees for registration of trade mark - Stamp duty on documentation for loans taken from banks Capital expenses or not Held that:- Following the decision in Commissioner of Income-Tax, Bombay City I Versus Ciba of India Limited [1967 (12) TMI 3 - SUPREME Court] - the professional fees, etc. paid for trade-mark is an expenditure of Revenue nature following the decision in Orissa Cement Ltd. vs. CIT [1968 (10) TMI 18 - DELHI High Court] - the amount spent on obtaining loan is an expenditure laid out wholly and exclusively for the purpose of the business - the object for which a loan is taken is an irrelevant consideration Decided against Revenue. Enhancement of book profit u/s 115JB cancelled - Provision for gratuity Held that:- Following the order in Commissioner of Income Tax. Versus Echjay Forgings (P) Ltd.[2001 (2) TMI 56 - BOMBAY High Court] it has been held that the provisions for gratuity and leave encashment were made on actuarial basis - If a provision is made on the basis of an actuarial valuation, then the liability is nothing but an ascertained liability, therefore, should not be added in the computation of book profit for the purpose of the provisions of section 115JB of the Act Decided against Revenue. Loss from cross currency swap transaction treated as speculative loss Held that:- It was not an independent transaction of swapping in foreign currency but the transaction was connected with the bank loan - The purpose of loan from UTI Bank as per sanction of loan term dated 22/04/2002, it was for setting up multiplex project at Baroda following the decision in CIT vs. Wood Ward Governor India [2007 (4) TMI 118 - HIGH COURT , DELHI] the judgement were not available before AO thus, this ground is required to be reconsidered at the stage of investigation, so that the purpose and nature of loan is first to be ascertained and then accordingly to treat the admissibility of loss as claimed by the assessee Decided in favour of Assessee. Abandoned project at Gurgaon Held that:- For both the years, the assessee has not claimed the expenditure in its computation of income but made a claim through notes annexed to the computation of income - the assessee wanted to pursue the like nature business already in existence, i.e. running of a multiplex and exhibition of cinematic films - the expenditure was towards technical reports and financial feasibility of the project and those project reports were obtained from the experts - the assessee is running a multiplex cinema theatre and the expenditure was in respect of a new project for the same line of business of running of multiplex and cinema theatre relying upon CIT vs. Priya Village Roadshows Ltd. [2009 (8) TMI 765 - Delhi High Court] - the assessee was also involved in the business of running cinemas - the revenue authorities is directed to allow the claim Decided in favour of Assessee.
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