TMI Blog2018 (4) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... period, the entertainment tax would be leviable. As per the Scheme, subsidy equivalent to the cost of building and machinery was allowed to be collected as entertainment tax with the operator/owner of the said Multiplex, being allowed to retain the amount, equivalent to the eligible amount over a period of 05 years. The issue is, therefore, covered in favour of the assessee in the case of CIT-1, Kolhapur vs. M/s. Chaphalkar Brothers, Pune (2017 (12) TMI 816 - SUPREME COURT). The Departmental Appeal has no merit - Decided in favour of assessee. - ITA. No. 3095, 3096 & 3094/Del./2014 - - - Dated:- 2-4-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L. P. Sahu, Accountant Member For the Revenue : Shri Kaushlendra Tiwari, Sr. D.R. For the Assessee : Shri S.K. Mehta, C.A. ORDER Per Bhavnesh Saini, J. M. All the appeals by the Revenue are directed against different orders of the Ld. CIT(A)-1, Dehradun, dated 06th February, 2014, for the A.Ys. 2009-2010, 2010-2011 and 2008-2009. 2. We have heard the learned Representatives of both the parties and perused the material on record. 3. The issue is same in all the appeals that Whether the Ld. CIT(A) was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced in the assessment order which inter alia provides that multiplex of the assessee would start exhibiting the film from 31st March, 2005 and assessee is entitled to receive entertainment tax for first 05 years which will be exempted 100% from entertainment tax, subject to the condition that if cost of construction of multiples is recovered before 05 years, then, for the remaining period, no such benefit shall be granted. The entertainment tax is exempted for benefit of owner of multiplexes for the amount payable by him which would be adjusted to cost. A.O. noted that entertainment tax subsidy granted by State of U.P. is given after the multiplex has started the operation. The purpose of scheme is to help the multiplex run profitably. It is, therefore, revenue receipt. The issue of the treatment meted-out to a subsidy (entertainment tax grant) received from Uttar Pradesh Government for operating Multiplex Cinema Theatre. The claim of the assessee is for treating this amount as capital receipt, whereas, the A.O. has treated this as revenue receipt, which has subsequently been placed outside the purview of Section 80IB of the Act and also on the ground that such receipt is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The Ld. D.R. relied upon the order of the A.O. and submitted that multiplex have been given exemption in payment of entertainment tax after they have been established. The subsidies given for meeting out day-to-day business and for smooth running of the multiplex. Therefore, it is revenue receipt. 7. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that subsidy was granted under the Uttar Pradesh Government Incentive Scheme for promotion for construction of multiplexes and the overall quantum of the subsidy is limited to the cost of construction of the multiplexes, which is capital receipt. He has submitted that identical issue have been decided by the Hon ble Supreme Court in the case of CIT-1, Kolhapur vs. M/s. Chaphalkar Brothers, Pune in Civil Appeal Nos.6513 6514 of 2012, Dated 07th December, 2017. He has, therefore, submitted that the issue is covered in favour of the assessee by the above Judgment of the Hon ble Supreme Court. Copy of the same is placed on record and provided to Ld. D.R. also. 8. We have considered the rival submissions and considered the material on record. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 was noticed that the scheme in question had fallen in the first category i.e. for the purpose of helping the growth of an industry. Though the collection was in the form of an entertainment Duty via sale of tickets for a limited period but its utilization was predetermined and granted with an assurance to cover up the cost of construction. Once it is demonstrated before us that too undisputedly that it was not attributed in any manner towards supplementing of day-to-day expenditure or in the furtherance of the profits than it cannot be said to be in the character of a revenue receipt. Contrary to this it was in the nature of a capital receipt being an incentive to supplement the construction expenditure of new set up of Multiplexes hence in the nature of capital receipt. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el. 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 S.Ganesh, learned senior counsel appearing for some of the respondents, have argued that if Sahney Steel is to be read in its entirety, the judgment on facts supports the proposition that it is only the purpose of the scheme that is the test for finding out whether the scheme is, in fact, capital or revenue in nature. The source of funds for the scheme and the form of the scheme are irrelevant and if it is clear that the purpose is in order that capital expenses be met out of the subsidy granted in the scheme, then the object of the scheme points to receipt of funds being capital in nature. They both stressed the fact that the statement of object and reasons specifically state that multiplexes are truly capital intensive, their period is long and, therefore, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 will not be open to the Revenue to contend that the refund of sales tax paid on raw materials or finished products must be treated as revenue receipt in the hands of the assessee. In both the cases, the Government is paying out of public funds to the assessee for a definite purpose. If the purpose is to help the assessee to set up its business or complete a project as in Seaham Harbour Dock Co. case, the monies must be treated as to have been received for capital purpose. But if monies are given to the assessee for assisting him in carrying out the business operation and the money is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of the trade. Thereafter, the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 of such incentives referred to that was the subject-matter for decision before this Court. In Para 10 this Court found: We have examined in this case the 1980 and 1987 Schemes. Essentially all the four Schemes are similar except in the matter of details. Four factors exist in the said Schemes, which are as follows: (i) Benefit of the incentive subsidy was available only to new units and to substantially expanded units, not to supplement the trade receipts. (ii) The minimum investment specified was ₹ 4 crores for new units and ₹ 2 crores for expansion units. (ii) Increase in the free sale sugar quota depended upon increase in the production capacity. In other words, the extent of the increase o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est 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 entire family as a whole. It was noticed that these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. It was also added that government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The aforesaid object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 theatre complex for a period not exceeding four years; Since the subsidy scheme in the West Bengal case is similar to the scheme in the Maharashtra case being to encourage development of Multiplex Theatre Complexes which are capital intensive in nature, and since the subsidy scheme in that case is also similar to the Maharashtra cases, in that the amount of entertainment tax collected was to be retained by the new Multiplex Theatre Complexes for a period not exceeding four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case. Accordingly, the appeals filed by the Department are di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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