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2020 (3) TMI 1145 - HC - Income TaxSubsidy pursuant to a scheme formulated and implemented by the Government for promotion of construction of Cinema Halls and support the film industry - revenue or capital subsidy - character of the receipt - HELD THAT:- As decided in SAHNEY STEEL AND PRESS WORKS LIMITED AND OTHERS VERSUS COMMISSIONER OF INCOME-TAX [1997 (9) TMI 3 - SUPREME COURT] if the monies are given to an assessee for assisting him for carrying out the business operation and the money is given only after and conditional upon commencement of the production, such subsidies must be treated as assistance for the purpose of trade. Applying the said legal position to the given case, the purpose of the scheme as evident from Annexure A/2, and in particular Rule 1, is obviously for promoting the construction of new Cinema Theaters. The effective date is given under Rule 3, as ‘14.01.1980’. The eligibility conditions are mentioned in Rule 4 and Rule 5 stipulates the ‘measure of subsidy’, which could be aspired by the assessee. Going by the said Rules, it is quite clear that the extent of benefit payable to an Assessee by way of subsidy is quantified with reference to the entertainment tax as specified under Rule 5([k). But for fixing the extent of benefit payable, Annexure A/2 does no where mention that the purpose of subsidy is to promote the trade or business. On the other hand, it is explicitly clear that the said scheme was introduced by the Government to promote the construction of new cinema theaters in the State and as such, the contention raised by the learned Standing Counsel for the Department to the contrary can only be repelled. Subsidy in the given circumstance will definitely constitute ‘capital subsidy’ and it is to be excluded from assessment of tax under the provisions of the Income Tax Act.
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