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TMI Blog2017 (12) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... . Adv. Mr. Santosh Krishnan, Adv. Mr. Yadunandan Bansal, Adv. Mr. Abhijat P. Medh, AOR Mr. K.V.Vishwanathan, Sr. Adv. Ms. Amrita Panda, Adv. Mr. Debesh Panda, Adv. Mr. R.P.Bhatt, Sr. Adv. Mr. Santosh Krishnan, AOR Mr. Rituraj Gupta, Adv. MR. Divyam Agarwal, Adv. Mr. Dhananjay Garg, AOR Mr. Ramesh Singh, Adv. Mr. Nikhil Goel, AOR Mr. Ashutosh Ghade, Adv. Mr. Annirudh Deshmukh, Adv. JUDGMENT HON'BLE R.F.NARIMAN,J. Leave granted. The present appeals arise from a batch of judgments dealing with cases which come from Maharashtra and West Bengal. Insofar as the civil appeals relating to Maharashtra are concerned, the subsidy scheme of the State Government took the form of an exemption of entertainment duty in Multiplex Theatre Complexes newly set up, for a period of three years, and thereafter payment of entertainment duty @ 25% for the subsequent two years. The object of introducing the necessary amendments in the Bombay Entertainments Duty Act to effectuate the aforesaid subsidy scheme was first done by way of an ordinance before 4th December, 2001, which ultimately became part of an Amendment Act. The statement of objects and reasons for introducing the aforesaid scheme reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and collected by the State Government from the proprietor of a Multiplex Theatre Complex the duty in respect of any such complex as follows,namely:- (i) for the first three years from the date of commencement of the Multiplex Theatre complex, no duty. (ii) for the subsequent two years, at the rate of twenty five percent of the rate of duty leviable under clause (b) and clause (c) of sub-section (1) or, as the case may be, sub section (3); (iii) from the sixth year, full amount of duty leviable at the rate specified in clause (b) and clause (c) of sub-section (1) or, as the case may be sub-Section (3). Provided that, the duty leviable shall also be subject to the provisions of sub-section (2), wherever applicable Explanation-For the purpose of this sub-section: (i) the date on which the Multiplex Theatre complex is opened to the public for admission shall be deemed to be the date of commencement of the Multiplex Theatre Complex; (ii) the change in the management of Multiplex Theatre Complex, or the change in the name of the complex shall not be construed as a fresh commencement of the Multiplex Theatre Compex. (b) The concession in duty as provided under clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fate and was dismissed substantially on the same reasoning. However, the Income-Tax Appellate Tribunal by its judgment dated 30.06.2009, went into the matter in some detail, and after setting out the object of the aforesaid scheme went on to hold as follows: "9.2 One aspect of the scheme in question is undisputed; after considering the clauses of the scheme, that the scheme do not provide any assistance for reimbursement of day to day revenue expenditure but the scheme is meant to build up and to promote new multiplex cinema halls which are nothing but for the construction purpose hence reimbursement is to cover-up the capital expenditure. xxxxxxxxx 10. In the light of the above discussion, we can therefore summarize our conclusion that broadly speaking the subsidy can be of two types: (i) for the purpose of helping the growth of an industry; (ii) For the purpose of supplementing the profits of an industry. 10.1 To ascertain whether in a particular case the subsidy in question fall under the category (I) or (ii) one has to carefully examine the form as well as substance of the impugned scheme. We have done that exercise, and on close examination undisputedly it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he large object said to be achieved in the grant of subsidy by way of complete and then partial roll back of entertainment duty may be in the nature of subsidy relating to complexes which are highly capital intensive and require Government support. But according to him, the fact that the subsidy kicks in only after the multiplexes started functioning and issued tickets on which entertainment duty is then waived, would show that in reality what has already been set up is not the immediate object of the subsidy but that it is really in the nature of a helping hand for running of the day to-day business of the multiplexes. He relied heavily upon the judgment in Sahney Steel (supra) to buttress his submission and stated that on facts, this was a case similar to Sahney Steel. On the other hand, he distinguished the judgment in Ponni Sugars (supra) stating that on the facts of that case, in paragraph 10, in particular, it was very clearly held that the benefit of the scheme had to be utilised only for re-payment of loan. Therefore, it was obviously capital in nature, and not revenue. On the other hand, Shri Jahangir Mistry, learned senior counsel appearing for the respondents, and Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business more profitably". The judgment of the House of Lords in Seaham Harbour Dock Co. Vs. Crook, 16 TC 333 was then referred to and distinguished. What is important for our purpose is the fact that in para 18 of that judgment, the test of whether the receipt of subsidy is capital or revenue is stated as follows:- "If any subsidy is given, the character of the subsidy in the hands of the recipient - whether revenue or capital - will have to be determined by having regard to the purpose for which the subsidy is given. If it is given by way of assistance to the assessee in carrying on of his trade or business, it has to be treated as a trading receipt. The source of the fund is quite immaterial." The Court went on, thereafter, to give a telling example in para 19 of the aforesaid judgment, which is set out herein below:- "For example, if the scheme was that the assessee will be given refund of sales tax on purchase of machinery as well as on raw materials to enable the assessee to acquire new plants and machinery for further expansion of its manufacturing capacity in a backward area, the entire subsidy must be held to be a capital receipt in the hands of the assessee. It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term loans, if any, outstanding from the Central financial institutions. The sugar factories should submit utilisation certificates annually from Chartered/Cost Accountant, holding certificate of practice. Utilisation certificate in respect of each sugar season during the incentive period should be furnished on or before 31st December of the succeeding year. Failure to submit utilisation certificate within the stipulated time may result not only in the termination of release of incentive free sale quota, but also in the recovery of the incentive free sale releases already made, by resorting to adjustment from the free sale releases of future years." The Court then referred to the background of the incentive scheme and to the fact that the Sampat Committee was set up to examine the question relating to the economic viability of new sugar factories. The Court then found in para 9 of the judgment that the Sampat Committee referred to the fact that the increase in the cost of new sugar factories was because of increase in the cost of plant and machinery. The Committee then stated that five possible incentives for making a sugar plant economically viable could be provided. It is two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 16 by then stating that this Court found that the assessee was free to use the money in its business entirely as it liked. Finally, it was found that, applying the test of purpose, the Court was satisfied that the payment received by the assessee under the scheme was not in the nature of a helping hand to the trade but was capital in nature. What is important from the ratio of this judgment is the fact that Sahney Steel was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. Applying the aforesaid test contained in both Sahney Steel as well as Ponni Sugar, we are of the view that the object, as stated in the statement of objects and reasons, of the amendment ordinance was that since the average occupancy in cinema theatres has fallen considerably and hardly any new theatres have been started in the recent past, the concept of a Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex, has emerged. These complexes offer various entertainment facilities for the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars, and the appeals were, therefore, dismissed. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference. In coming to the West Bengal cases, we find that the West Bengal Finance Act, 2003 which amended the Bengal Amusements Tax Act of 1922 also provided: The Bengal Amusements Tax Act, 1922. The provision seeks to provide, in order to encourage development of multiplex theatre complex, a very modern and highly capital-intensive entertainment centre, financial assistance to the proprietors of such complex by allowing them to retain, by way of subsidy, the amount of entertainment tax collected against the value of ticket for admission to such multiplex th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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