TMI Blog2015 (2) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of subsidy received by the assessee is on capital account cannot be faulted. - TAX APPEAL NO. 110 of 2015 - - - Dated:- 16-2-2015 - MR.JAYANT PATEL MR.S.H.VORA JJ. For the Appellant: Mr KM Parikh, Advocate ORAL ORDER (PER : MR.JAYANT PATEL) 1. The Revenue has preferred the present appeal on the following substantial question of law and it appears that the second question is dependent upon the first question and, therefore, we find that the real question which may be required to be considered is as under:- Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the decision of the CIT(A) directing the A.O. to treat the entertainment tax exemption in respect of Multiplexes as capital receipt, not exigible to tax, without appreciating that the subsidy received by the assessee was after the completion of the cinema house and commencement of operation and used entirely for the business operation, and therefore, revenue in nature? 2. The learned counsel appearing for the Revenue has brought to our notice the decision of this Court in Tax Appeal No.167 of 2012 and allied matters in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the opinion that the object of the incentive was not to enable the assessee to acquire new plant or machinery but for the purpose of carrying the business operations. Likewise, the assessee also received similar entertainment tax exemption of ₹ 1.85 crores (rounded off) from the State of Maharashtra under its own incentive scheme for its multiplex unit situated at Pune. With respect to such incentive also the revenue contended that the receipt was revenue in nature. 4. Assessee carried the matter in appeal. CIT(Appeals) reversed the decision by reversing the Assessing Officer's decision and held that the receipt was capital in nature. The Appellate Authority examined the provision of the scheme and noted that the concession in entertainment tax was relatable to the capital investment made. With respect to Pune unit also, the Commissioner held in favour of the assessee. 5. Revenue carried the matter further in appeal before the Tribunal. The Tribunal by the impugned judgement confirmed the view of CIT(Appeals). In the said judgement, the Tribunal principally relied on the decision of Bombay High Court in case of Commissioner of Income Tax, Kolhapur Vs. M/s. Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an existing unit was made eligible for incentives. It was further provided that the new project should have separately identifiable capital investment and should not be an expansion of the existing project. Expansion of an existing project would also be eligible for incentives provided the existing tourism unit increases its investment in fixed capital or capacity by atleast 50% or more. Clause 4.4 of the scheme defines ineligible investment which included the working capital, goodwill, pre-operative expenses etc. Clause 4.5 defines eligible capital investments to include lands as required for the project, building used for eligible unit including administrative building etc., plant and machinery, the cost of development of the environment of the location of the eligible unit, installation charges etc. 9. Clause 8 of the scheme pertains to investments and provides a tax holiday of 5-10 years to new units and expansion of existing units in respect of the specified taxes up to 100% of the capital investment. One of the taxes specified for exemption is entertainment tax. Clause 8.1 of the scheme pertains to period of eligibility and provides that the quantum of ince ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her revenue or capital will have to be determined having regard to the purpose for which the subsidy was given. It is ofcourse true that the said decision, certain sales tax exemption was treated as revenue in nature. However, the said decision came up for consideration subsequently before the Apex Court in case of Commissioner of Income Tax Vs. Ponni Sugars and Chemicals Ltd. (supra) wherein it was observed that the character of receipt of a subsidy in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is 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 scheme is to enable the assessee to set up a new unit or expand the existing unit then the receipt of subsidy would be of capital account. 12. Considering the above decision of the Supreme Court and applying the ratio laid down therein to the scheme under consideration, we are of the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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