TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 848
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....justment on account of AMP Expenses to the tune of INR 3,34,06,17,000/-. 4. The AO/TPO/DRP grossly erred in assuming jurisdiction under Section 92CA of the Act, in respect of transactions which did not partake the character of "international transactions" within the meaning of the term as defined in Section 92B read with Section 92F(v) of the Act. 5. The AO/TPO/DRP have failed to discharge the preliminary onus placed upon them to establish the existence of any "arrangement", whereby the AE being the owner of the intellectual property had directed any level of AMP expenditure to be incurred by the Appellant. 6. That the AO/TPO/DRP erred in sustaining the adjustment in respect of AMP expenses incurred by the Appellant on the ground that the existing intensity of AMP function performed by the Appellant resulted in the creation of marketing intangibles in respect of the brands owned by the AE. 7. That the AO/TPO/DRP failed to appreciate that review of advertisement material by the AE was only to ensure that such material confirmed to the broad guardrails of the advertisement policy of the AE and was not indicative of any arrangement to direct advertising spend by the appell....
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....ade in the case of a licensed manufacturer until and unless the Revenue shows that there exists an explicit agreement/arrangement between the Appellant and its AE for the purposes of incurring AMP expenses. 17. That the AO/TPO/DRP erred in concluding that the expenses incurred by the Appellant resulted in the enhanced brand value of the brands owned by the AE. Without prejudice 18. That the AO/TPO/DRP erred in not appreciating that the AMP expenditure already formed part of the benchmarking analysis of the manufacturing segment of the Appellant, and therefore, having determined the profitability of manufacturing segment to be at arm's length, it was not open for the TPO to benchmark AMP expenditure separately. 19. That the AO/TPO/DRP erred in not appreciating that there was no shifting of profit outside India that warranted any transfer pricing adjustment. 20. That the AO/TPO/DRP erred in adopting the "Other Method", as prescribed under Rule 10AB of the Income-tax Rules, 1962 ("Rules"), as the most appropriate method for the purposes of computing the arm's length price ("ALP") of the alleged "international transaction" of AMP expenses incurred by the appellant. 21....
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....PO to recompute the AMP adjustment accordingly. Learned Counsel for the Assessee submitted that the appeals of the assessee for A.Ys. 2006-2007 to 2010-2011 and 2011-2012 to 2013-2014 have been decided by ITAT, I-2 Bench, Delhi, vide Order dated 19.11.2018 in ITA.No.1334/Del./2010 etc., and the same issue have been dealt in paras 48 to 68 of the Order and similar addition have been deleted by holding that AMP adjustment made by the TPO/A.O. cannot be sustained. The Order of the Tribunal above is reproduced as under : 48. "We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us in respect of transfer pricing issue pertaining to AMP adjustment made by the TPO. We have already 'discussed in detail, the brief facts and background of the cases in the light of the material on record and as captured in the arguments placed by the parties. As stated in the earlier part of the order, adjustment has been made on account of AMP expenses by the TPO in different years on different reasons by applying different methods. For instance, in the appeals for the Assessment Years 2006-07 to 2009- 10, the TPO has com....
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....n India as well as to its AEs in Bangladesh, Nepal, Bhutan and Sri Lanka. It has obtained a license from its US parent AE for the technology to manufacture the concentrate and to use and exploit the brands owned by the said AE in the regions designated to the assessee company. The relevant clauses of Trademark, Licensing Agreement dated 09.11.1989 has already been referred above whereby the assessee was granted a non-transferrable, royalty free license for the use of trademarks in its territory. The assessee is exclusive user of the trademarks in India in respect of syrups and concentrate but was granted non-exclusive right for the beverages manufactured by it. The manufacture of concentrate is done exclusively by the assessee, whereas the bottling activity is done by the group entities as well as independent bottlers spread across the country for the smooth operation and reach to every corners of India and neighbouring countries. As discussed above, it is an undisputed fact that assessee is not paying any trademark royalty to its parent AE. Thus, assessee has characterize itself as a full-fledged manufacturer exposed to all kind of risks associated with carrying out such business.....
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.... with advertisement and marketing agencies NIL Yes Yes Selling and distribution in India of bottled beverage NIL NIL Yes Pricing of final product NIL Yes NIL All the necessary functions of strategizing, advertising and marketing activities, its implementation and controlling across the country is conducted by the assessee company alone for market penetration in India. Thus, in a way assessee is the economic owner of the brand though not a legal owner. As a full-fledged manufacturer, the assessee company has been assuming all the risks for promoting its sales and thereby the entire profitability is subject to tax in India and no residual profits are enjoyed by the AE and neither any kind of royalty is also paid. Looking to the nature of business in which assessee is involved, it has incurred huge advertising, marketing and promotional expenses which is evident from the fact that during the Assessment Year 2006-07 alone, the ratio of AMP upon sales was 66.89%. Now such a huge incurrence of AMP expenses has led to AMP adjustment by the Revenue holding that incurring of such a huge AMP has also benefited the AE in the nature of promotion of its brand and tradema....
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....ly for promoting assessee's own business and nowhere it has been brought on record that such a reimbursement of the cost was subject to any markup or any functions have been provided from where any income has been derived by the AE. The assessee on the basis of joint decision taken by Pepsi entities located in various cricketing jurisdiction had decided to reimburse the cost incurred by Ireland (AE) for sponsorship and advertisement as it will help the promotion of the business of such entities including that of the assessee company. Accordingly, the assessee has paid its proportionate share of reimbursement on cost to cost basis after requisite approvals from the Governmental authorities. Based on this transaction alone, TPO has deduced that: - * firstly, since AE is recovering the AMP expenditure incurred by it from the assessee which goes to prove that AE is controlling the AMP activities of the assessee; * secondly, it also indicates that there is some kind of arrangement between the assessee and its AE regarding the incurrence on AMP expenditure, and; * lastly, incurring of huge expenditure of AMP indicates that such kind of expenditure mus....
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....antum of AMP spent or it was spent on behest of AE. The TPO has not recorded or identified any such separate arrangement or agreement that AMP expenses incurred by the assessee company are in pursuance of any agreement or arrangement. It is also not the case of the Department that the expenses which has been incurred by the assessee company during the course of its business have any bearing whatsoever on any other international transaction with the AE, other than reimbursement of expenditure of Rs. 33.60 crores as discussed above. 53. Section 92B defines the international transaction in the following manner: - "(1) For the purposes of this section and sections 92, 92C, 92D and 92E, "international transaction" means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, ....
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....ng or borrowing money, etc. functions having bearing on the profits, income, losses or assets is reckoned as international transaction. Besides this, if such a transaction is based on any mutual agreement or arrangement between the AEs for allocation or any contribution to any cost or expenditure incurred or to be incurred for the benefit, service or facility, then also such an agreement or arrangement is treated as international transaction. Clause (v) of Section 92F reads as under: "92F (v). "transaction' includes an arrangement, understanding or action in concert, - (A) Whether or not such arrangement, understanding or action is formal or in writing; or (B) Whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings." This definition of transaction has to be read in conjunction with the definition given in section 92B, which means that the transaction has to be first in the nature given in Section 92B (1); and then when such transaction includes any kind of arrangement, understanding or action in concert amongst the parties, whether in writing or formal, then too it is treated as international transaction. Here the ....
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....s taken place between the two AEs (except for reimbursement of Rs. 33.60 crore). Now it has been well settled by the Hon'ble Jurisdictional High Court in the case of Maruti Suzuki India Pvt. Ltd. (supra) that onus is upon the Revenue to demonstrate that there existed an arrangement between the assessee and its AE under which assessee was obliged to incur excess amount of AMP expenses to promote the brands owned by the AE. The relevant observation and the finding of the Hon'ble High Court in paragraph 60 reads as under: "60......Even if the resort is had to the residuary part of clause (b) to contend that the AMP spend of MSIL is "any other transaction having a bearing" on its "profits, income or losses" for a 'transaction' there has to be two parties. Therefore, for the purposes of the 'means' part of clause (b) and the 'includes' part of clause (c,) the revenue has to show that there exists an 'agreement' or 'arrangement' or 'understanding' between MSIL and SMC whereby MSIL is obliged to spend excessively on AMP in order to promote the brand SMC...... 61......Even if the word 'transaction' to include 'arr....
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....e here in this case there was no obligation on the assessee company to incur AMP expenditure to promote the brand of the AE and no such obligation too has been brought out by the TPO in the impugned order. It is also evident from clause (xiii) of the Agreement that the risk and reward of incurring the AMP expenditure lied entirely with the assessee company and the foreign AE was completely insulated from such risk and rewards arising from the manufacturing activity carried on by the assessee company in India. Assessee has been operating as a licensed manufacturer of concentrates in India which is used in manufacturing of soft drinks and it had obtained the license from its parent AE for the technology to manufacture concentrate and to exploit the brand owned by the US AE for the promotion of business of assessee company in the territories in India. The assessee has been independently performing the function of procurement of raw material, manufacturing of concentrates, development of advertising and marketing strategy, determination of the marketing budget, design concept and content of advertisement, choice of media, pricing of the concentrate and the sales of concentrates to reta....
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....lp in promotion of sales in India and not in the jurisdiction of the other AEs. Since assessee happened to be the economic owner of the brand in India, therefore, it was entitled to all such economic benefits arising out of intangible benefit. Because, assessee bore of the risk associated with the AMP spending and has ultimately benefited from such expenses which will result increase sales. It is also not the case of the TPO that the residual profits from exploitation of brand were flowing out of India to the AE in any way and in no manner the income of the AE was increasing from where it could fund the reimbursement of advertising and marketing expenses to the assessee in India. 57. The TPO has also referred to the decision of Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communication India Pvt. ltd. to contend that mere incurrence of AMP expenditure in respect of brand not owned by the assessee has to be treated as international transaction. Such an inference by the learned TPO is not tenable in view of the Hon'ble Delhi High Court in the judgment in the case of Maruti Suzuki India Pvt. Ltd. wherein the ratio of Sony Ericsson judgment has been explained....
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....issions proceed purely on surmises and conjectures and if accepted as such will lead to sending the tax authorities themselves on a wildgoose chase of what can at best be described as a 'mirage'. First of all, there has to be a clear statutory mandate for such an exercise. The Court is unable to find one. To the question whether there is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions". Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasizes that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly in light of the fact that the BLT has been expressly negatived by the Court in Sony Ericsson Mobile Communications India (P.) Ltd. (supra). Therefore, t....
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....tative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed hereinbefore, what the Revenue has sought to do in the present case is to resort to a quantitative adjustment by first determining whether the AMP spend of the Assessee on application of the BLT, is excessive, thereby evidencing the existence of an international transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case. 72. As rightly pointed out by the Assessee, while such quantitative adjustment involved in respect of AMP expenses may be contemplated in the taxing statutes of certain foreign countries like U.S.A., Australia and New Zealand, no provision in Chapter X of the Act contemplates such an adjustment. An AMP TP adjustment to which none of the substantive or procedural provisions of Chapter X of the Act apply, cannot be held to be permitted by Chapter X. In other words, with neither the substantive nor the machinery provisions of Chapter X of the Act being applicable to an AMP TP adjustment, the inevitable conclusion is that Cha....
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....r which certain types of expenditure incurred by way of payment to related parties is not deductible where the AO "is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods." In such event, "so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." The AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery' provision in Chapter X which enables an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is found that there is an international transaction in that regard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic trends both international and domestic, the consumption patterns, market behaviour and so on. A simplistic approach using one o....
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....ssertion in paragraph 17.6 that comparison can be only made by choosing comparable of domestic cases not using any foreign brand, is contrary to the Rules. It amounts to writing and prescribing a mandatory procedure or test which is not stipulated in the Act or the Rules. This is beyond what the statute in Chapter X postulates. Rules also do not so stipulate. The argument and reasoning in paragraph 17.6 in a way loses focus on the main issue and controversy; whether the arm's length price fixed between the two AEs is adequate and justified and would have been paid if the transaction was between two independent enterprises. The two independent enterprises must be two unrelated parties having no connection. It does not matter whether the comparables are domestic enterprises or not. However, and it is manifest that the comparable should have similar rights, if any, as the tested party in the brand name, trademark, etc. 121. During the course of hearing before us, counsel for the Revenue had submitted that paragraph 17.4 should be treated as illustrations and not as binding comparables. We would prefer to observe, that an Assessing Officer/ TPO can go and must examine the questi....
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....alue of international transaction. (iii) There is no provision either in the Act or in the Rules to justify the application of BLT for computing the Arm's Length Price and there is nothing in the Act which indicate how in the absence of BLT one can discern the existence of an international transaction as far as AMP expenditure is concerned. (iv) Revenue cannot resort to a quantify the adjustment by determining the AMP expenses spent by the assessee after applying BLT to hold it to be excessive and thereby evidencing the existence of the international transaction involving the AE. 59. Here in this case also, the TPO has tried to prove the international transaction, vis-à-vis, AMP after applying the BLT which now in view of settled law by the Hon'ble Jurisdictional High Court, such an approach has to be rejected. Hence at the very threshold the spending of AMP expenditure by the assessee cannot be held to be an international transaction between the assessee and its AE. 60. Another point which has been raised by the Revenue is that, huge spending of AMP expenses amounts to brand building and trade mark of the AE, and therefore, such a spending gives a benefi....
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....different ways in which property is usually acquired. When a man has got it he may keep it as his own. He may vindicate his exclusive right to it if necessary by process of law. He may dispose of it if he will--of course, under the conditions attaching to property of that nature ... What is goodwill? It is a thing very easy to describe very difficult to define. It is the benefit and advantage of the good name, reputation, and: connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However, widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there. To analyse goodwill and split it up into its component parts, to pare it down as the Commissioners desire to do....
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....evelopment of a trade mark or goodwill takes place over a passage of time and is a slow ongoing process. In cases of well recognised or known trade marks, the said trade mark is already recognised. Expenditures incurred for promoting product(s) with a trade mark is for exploitation of the trade mark rather than development of its value. A trade mark is a market place device by which the consumers identify the goods arid services and their source. In the context of trade mark, the said mark symbolises the goodwill or the likelihood that the consumers will make future purchases of the same goods or services. Value of the brand also would depend upon and is attributable to intangibles other than trade mark. It refers to infra-structure, know-how, ability to compete with the established market leaders. Brand value, therefore, does not represent trade mark as a standalone asset and is difficult and complex to determine and segregate its value. Brand value depends upon the nature and quality of goods and services sold or dealt with'. Quality control being the most important element, which can mar or enhance the value. Therefore, to assert and profess that brand building as equival....
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...., which meets the recognition criteria under AS-26. Internally generated goodwill or brand is not treated as an asset in AS-26 because it is not an identifiable resource controlled by an enterprise, which can be reliably measured at cost. Its value can change due to a range of factors. Such uncertain and unpredictable differences, which would occur in future, are indeterminate. In subsequent paragraphs, AS-26 records that expenditure on materials and services used or consumed, salary, wages and employment related costs, overheads, etc., contribute in generating internal intangible asset. Thus, it is possible to compute good- will or brand equity/value at a point of time but its future valuation would be perilous and an iffy exercise. In paragraph 44 of AS-26, it is stated that intangible asset arising from development will be recognised only and only if amongst several factors, can demonstrate a technical feasibility of completing the intangible asset: that it will be available for use or sale and the intention is to complete the intangible asset for use or sale is shown or how the intangible asset generate probable future benefits, etc. The aforesaid position finds recognition ....
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....pete and are available in abundance. Advertisements and sales promotion are conducted to increase sale and their impact is limited and felt for a short duration. No permanent character or advantage is achieved and is palpable, unless special or specific factors are brought on record. Expenses for advertising consumer products generally are a part of the process of profit earning and not in the nature of capital outlay. The expenses in the present case were not incurred once and for all, but were a periodical expenses which had to be incurred continuously in view of the nature of the business. It was an on-going expense. Given the factual matrix, it is difficult to hold that the expenses were incurred for setting the profit earning machinery in motion or not for earning profits.". (Also see, CIT v. Spice Distribution Ltd., I. T. A. No. 597 of 2014, decided by the Delhi High Court on September 19, 2014 [2015] 374 ITR 30 (Delhi) and CTT v. Salora International Ltd. [2009] 308 ITR 199 (Delhi). Accepting the parameters of the "bright line test" and if the said para meters and tests are applied to Indian companies with reputed brands and substantial AMP expenses would lead to diffi....
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....e Hon'ble High Court after describing the concept of the "brand" had made a clear cut demarcation between development and exploitation of brand which is either in the form of trademark or goodwill which takes place over a passage of time by which its value depends upon and is attributable to intangibles other than trademark like, infrastructure, knowhow, ability to compete in the established market, lease, etc. Brand value does not represent trademark as asset and it is quite difficult to determine and segregate its value. Brand value largely depends upon the nature of goods and services sold, after sales services, robust distributorship, quality control, customer satisfaction and catena of other factors. The advertisement is more telling about the brand story, penetrating the mind of the customers and constantly reminding about the brand, but it is not enough to create brand, because market value of a brand would depend upon how many customers you have, which has reference to a brand goodwill. There are instances where reputed brand does not go for advertisement with the intention to increase the brand value but to only increase the sale and thereby earning greater profits. It....
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....6.26. For example, Company A, the legal owner of a trademark, may provide an exclusive licence to Company B to manufacture, market, and sell goods using the trademark. One intangible, the trademark, is legally owned by Company A. Another intangible, the licence to use the trademark in connection with manufacturing, marketing and distribution of trademarked products, is legally owned by Company B. Depending on the facts and circumstances, marketing activities undertaken by Company B pursuant to its licence may potentially affect the value of the underlying intangible legally owned by Company A, the value of Company B's licence, or both. 6.42 While determining legal ownership and contractual arrangements is an important first step in the analysis, these determinations are separate and distinct from the question of remuneration under the arm's length principle. For transfer pricing purposes, legal ownership of intangibles, by itself, does not confer any right ultimately to retain returns derived by the MNE group from exploiting the intangible, even though such returns may initially accrue to the legal owner as a result of its legal or contractual right to exploit the intang....
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....mitted that the stand of the Revenue is that, the expenditure incurred by the Indian subsidiary of an MNE group on market function amounts to incurring of such expenses for and on behalf of the parent company outside India because; * Firstly, such kind of expenses promote the brand/trademarks that are legally owned by the foreign parent AE; * Secondly, these expenditures create or develop marketing intangibles in the form of brands, trademarks, customer list dealer/distribution channels, etc. even though Indian company may not be the owner or have any right in these intangibles, but development of such intangibles deserves compensation for computing the value of compensation and the required adjustment. A comparison of the average of AMP spent by the comparables in a similar line of business has to be made to determine the routine amount spent on AMP for the product sale and any such expenditure over and above is purely for developing the brand value or other marketing intangibles for the benefit of the AE; and it is in the form of the service to the AE which requires adjustment along with the markup of the service charge on the same work out on the cost plus ....
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.... subsidiary in India for any marketing expenses. Here, we have already stated at several places that parent AE of the assessee-company has not carried out any function in India and had not assumed any risk in India and even for the license for use of trademark, no royalty has been paid. Hence, no benefit whatsoever has accrued to the parent AE. Accordingly, we are of the opinion that under these facts and circumstances of the case it is very difficult to attribute any kind of Arm's Length compensation which is supposed to be made by the AE to the assessee company. 64. Thus, in view of discussion made above, we hold that, firstly, there is no international transaction in the form of any agreement or arrangement on AMP expenditure incurred by the assessee company; and secondly, under FAR analysis also, no such benefit from the AMP expenditure having any kind of bearing on the profits, income, losses or assets as accrued to the AE or any kind of benefit has arisen to the AE. 65. As stated above, from the Assessment Years 2006-07 to Assessment Year 2008-09, the TPO has applied BLT not only for identifying the international transaction but also for making the adjustment. From ....
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....mining those profits, it is essential to first identify the relevant transaction to be covered under PSM. Where a taxpayer has controlled transactions with more than one AE, it is also necessary to identify the parties in relation to that transaction. Comparable data is relevant in the profit split analysis to support the division of profits that would have been achieved between independent parties in comparable circumstances. However, where comparable data is not available, the allocation of profits may be based on division of functions (taking account of the assets used and risks assumed) between the AEs. Further, the TP Guidelines also suggest two approaches in the effective application of PSM, which are: - (i) Contribution analysis: Under the contribution analysis, the combined profits, which are the total profits from the controlled transactions under examination, would be divided between the associated enterprises based upon a reasonable approximation of the division of profits that independent enterprises would have expected to realize from engaging in comparable transactions. (ii) Residual analysis: Under the residual analysis, the combined profits from the controlled....
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....rnational transaction has to be determined and thereafter, if incurrence of AMP expenses is to be considered from the value of such international transaction then the combined profit has to be determined from the value of such international transaction. No FAR analysis of AE has been carried out or even demonstrated that any kind of profit has been derived by the AE from the AMP expenses incurred in India. Otherwise also, the profit earned on account of AMP expenses incurred by the assessee by way of economic exploitation of the trademark/brand in India already stands captured in the profit and loss account for the assessee company and the same has duly offered to tax and hence there was no logic to compute or make any Transfer Pricing Adjustment on this score. 66. The TPO has followed the same reasoning in the Assessment Year 2013-14 also, but the DRP did not find any substance in the TPO's approach and directed the application of 'Other Method' as prescribed under Rules as against the application of PSM. By applying 'Other Method', adjustment had been made by comparing the AMP/sales ratio of the US parent AE with that of the assessee company and thereafter ....
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....o AY 2013-14 are decided in favour of the assessee and accordingly these grounds are allowed." 5.1. He has, therefore, submitted that issue is covered in favour of the assessee by the above Order of the Tribunal. 6. The Ld. D.R. did not dispute the same. 7. Ground Nos. 29 to 31 reads as under : "Corporate Tax Grounds Re: Addition on account of Industrial Promotional Assistance ("IPA") subsidy 29. That the AO/DRP erred in making an addition of INR 8,07,52,389/- on account of IPA Subsidy received by the Appellant during the subject assessment year from the Government of West Bengal under the West Bengal Incentive Scheme, 2004. 30. That the AO/DRP erred in law in treating IPA subsidy received by the Appellant as revenue in nature, without appreciating the true intent of the West Bengal Incentive Scheme 2004, which was to promote setting up or expansion of existing large/small scale units in the state of West Bengal. 31. That the AO/DRP erred in law in completely ignoring the fact that the quantum of IPA Subsidy was limited to 100% of the Fixed Capital Investment which in itself indicated the purpose of the scheme and capital nature of the said subsidy". 8. Learned Cou....
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....y to new units or to existing units which were initiating substantial expansion. Under the Scheme IPA was made available @ 75% of the sales tax in the previous year for which the claim was made and the total value of incentive was not to exceed the fixed capital investment. Thus, Subsidy was based upon fixed capital investment made and only the mode of disbursement was in the form of re-payment of sales tax paid. The Hon'ble Supreme Court in the case of CIT vs. Chaphalkar Brothers (supra) held that subsidiary scheme of the State Government to encourage development of multiple theatre complexes is capital in nature and not revenue's receipts there also subsidy was in the form of exemption from payment of entertainment due for the period of three years. Merely because here in this case the quantification of subsidy was based on reimbursement of sales tax, it does not meant that it is a revenue receipt. This view now is well supported by the various decisions as noted above that character of subsidy in the hands of the assessee is the determinative factor having regard to the purpose for which subsidy was given. Accordingly, we hold that the subsidy received by the assessee fr....