TMI Blog2014 (3) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... arly looking to the scheme of the Act of 1957 as also the object and purport of the exemption notification, the assistance in question cannot be said to be an operational subsidy so as to be taken as a revenue receipt. We find correct the observations by ITAT that the remission had been granted by way of incentive of capital receipts in the construction of cinema building. The submission that once the assessee has collected the entertainment tax from the persons admitted to the entertainment and has not deposited the same with the Government, it is required to be treated as revenue receipt remains devoid of substance. The remission by the Government had been to the proprietor of the entertainment and not to the person admitted to the entertainment. Tribunal was justified in affirming the deletion of addition being the amount of entertainment tax capitalized as subsidy - Decided against revenue. - D.B. IT Appeal No. 144 of 2007 - - - Dated:- 4-3-2014 - DINESH MAHESHWARI AND Banwari Lal Sharma, JJ. For the Appellant : K.K. Bissa For the Respondent : Anjay Kothari ORDER Dinesh Maheshwari, J. This appeal by the Revenue against the order dated 21.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e views of the CIT (A) while observing that the impugned amount being that of grant-in-aid, was required to be treated as a capital receipt. The ITAT examined the exemption notification issued under the Rajasthan Entertainments and Advertisements Tax Act, 1957 ('the Act of 1957') and held as under: - 13 .As per this notification, the assessee is not required to pay any entertainment tax for first five years. Any amount collected under the head entertainment tax and additional tax collected by him, from the date of exhibition of picture in newly constructed cinema house, would amount to subsidy paid by the State Government. This amount has to be treated as a liability being capital subsidy reserve. This amount is not required to be deposited for a period of five years and actually this is a sort of a subsidy, which is to be treated as a capital reserve. The remission for new cinema for remitting entertainment tax payable to new cinema house under construction was formulated by the State Government to assist the assessee for expenditure actually incurred in the construction of a new cinema house for the growth of new cinema building in the public interest without any obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have been subjected to the tax as a revenue receipt. The learned counsel has submitted that the ratio of the referred decision in Sahney Steel Press Works Ltd. (supra) does not operate against the claim of the assessee. The learned counsel has referred to the decision of the Hon'ble Supreme Court in CIT v. Ponni Sugars Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87; and has also referred to the decisions in CIT v. Chaphalkar Bros. [2013] 351 ITR 309 (Bom.); Dy. CIT v. Inox Leisure Ltd. [2013] 351 ITR 314/213 Taxman 160/30 taxmann.com 127 (Guj.); and Kalpana Palace v. CIT [2005] 275 ITR 365/[2004] 141 Taxman 392 (All.) in support of his contentions. 6. Having given thoughtful consideration to the rival submissions and having examined the record, we find nothing of error or illegality on the part of the appellate authorities in allowing the questioned amount as capital subsidy; and we are clearly of the view that formulated question deserves to be answered in favour of assessee. 7. It is noticed that in the scheme of the Act of 1957, the levy of entertainment tax is prescribed in sub-section (1) of Section 4 thereof, which is on payment for admission to an enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government being of the opinion that it is expedient in the public interest so to do, hereby exempts entertainment tax (including additional entertainment tax) for a period of five year, payable by a new Cinema Hall constructed subject to the condition that commercial exhibition of films in such cinema hall should start upto March 31, 2000. . 10. The principles for finding out as to whether a particular income in the form of subsidy is to be treated as capital or revenue receipt have been enunciated by the Hon'ble Supreme Court in the case of Ponni Sugars Chemicals Ltd. (supra) in the following: 14.... The importance of the judgment of this Court in Sahney Steel case (supra) lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then 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. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assessee is on capital account cannot be faulted. Accordingly, both the appeals are dismissed with no order as to costs. 13. In Sahney Steel Press Works Ltd. (supra), subsidies were found to have been granted only for the purpose of carrying on business of the assessee and not for the purpose of bringing into existence any new assets and hence, the Hon'ble Supreme Court observed,- 13. In the case before us, subsidies have not been granted for produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted to the entertainment and has not deposited the same with the Government, it is required to be treated as revenue receipt remains devoid of substance. The remission by the Government had been to the proprietor of the entertainment and not to the person admitted to the entertainment. The remission had been the methodology adopted by the State Government to provide assistance to the new cinema hall; and had been essentially in the nature of a subsidy, i.e., the assistance from the Government to the new cinema hall. The principles in the referred decisions of the Hon'ble Supreme Court, in our view, support the contention urged on behalf of the assessee; and the decision of the Hon'ble Allahabad High Court in Kalpana Palace (supra), with which we respectfully concur, directly applies to the present case. 18. Accordingly, the formulated question is answered in the affirmative that the Tribunal was justified in affirming the deletion of addition of ₹ 9,13,143/-, being the amount of entertainment tax capitalized as subsidy; and that the referred decisions do not operate against the assessee. 19. In view of the above, the appeal fails and is, therefore, dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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