2020 (3) TMI 1145

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....e, the Assessee satisfied all the requirements of the Madhya Pradesh Naye Cinemagharon Ke Nirman Ko Protsahan Yojna Ke Sahayata Anudan Niyam, 1982 (for short 'the Rules'). The construction of the Cinema Hall was effected accordingly and the subsidy flowing from the said Rules was given, the measure which was worked out in terms of Rule 5 of Annexure A/2 Rules. 3. According to the Income Tax Department, the act of the Assessee treating it 'capital subsidy' was not correct and it ought to have been reckoned as 'revenue subsidy' in view of the fact that the same was provided only to promote the business of the Assessee and not for construction of the Cinema House. Further, the scheme was introduced in the year 1982, whereas the exhibition was started in the cinema hall of the Assessee only from April, 1992. 4. The sequence of events reveals that the Appellant, who is doing some business in the field of transportation had also ventured into the cinema field by constructing a theater by name "Swaroop Theater" in Durg, Chhattisgarh. It is stated that as per the Annexure A/2 scheme, providing for payment of subsidy to promote the construction of Cinema Houses, the Appellant put fort....

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....19.09.2017, when these matters came up for consideration before this Court, substantial questions of law were raised in the following terms: "(i) Did the Income Tax Appellate Tribunal act in accordance with law in holding that an amount of Rs. 7,00,591/- received by the Appellant as subsidy under the Madhya Pradesh Naye Cinemagharon Ke Nirman Ko Protshahan Yojana Ke Sahayata Anudan Niyam, 1982 is treated directly linked with the revenue business? (ii) Whether the Tribunal had acted in accordance with law and in conformity with the directions issued by this Court in Income Tax Appeal No.08 of 2006? (iii) Whether on the facts and in the circumstances of the case the Tribunal committed error of law by not invoking the purpose test for determining the character of subsidy as laid down by the Hon'ble Supreme Court in the case of CIT v. Ponni Sugars & Chemicals Ltd. (2008) 219 CTR (SC) 105?" 8. We have heard Shri S. Rajeshwar Rao, learned counsel for the Appellant- Assessee and Ms. Naushina Afrin Ali, learned Standing Counsel for the Respondent-Revenue, with reference to the substantial questions of law and other incidental aspects involved. 9. The learne....

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....le 5, it is necessary to have the said Rule also extracted, which is as follows: With reference to Rule 5([k) of the Rules, the learned Standing Counsel submits that the Appellant is not entitled to get the benefit as it could only be inferred that the benefit was given to the Assessee for promotion of the trade/business, more so, in view of the observations made by the Supreme Court in paragraph 18 of Sahney Steel & Press Works (supra) as mentioned above. We find it difficult to accept the said proposition for more reasons than one.   13. It will be worthwhile to note the contents of paragraph 15 of the judgment passed by the Apex Court in Sahney Steel & Press Works Ltd. (supra) for understanding the facts situation and hence, it is reproduced below: "15. In the case before us, the payments were made to assist the new industries at the commencement of business to carry on their business. The payments were nothing but supplementary trade receipts. It is true that the assessee could not use this money for distribution as dividend to its shareholders. But the assessee was free to use the money in its business entirely as it liked and was not obliged to spend the m....

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.... be looked into. This is evident from the observations in 'paragraph 14' and elsewhere of the said verdict highlighting the need and necessity to apply the "purpose test". It is also brought to the notice of this Court by the learned counsel for the Appellant that the basic issue, whether the subsidy given for construction was to be treated as capital subsidy or revenue subsidy was considered by the Apex Court recently in Commissioner of Income Tax-1, Kolhapur v. M/s. Chaphalkar Brothers, Pune; AIR 2018 SC 132, as well. It has been categorically declared therein that the 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. 16. Coming to the verdict passed by the Tribunal, it is relevant to note that the Tribunal has has very much adverted to the law declared by the Apex Court in Sahney Steel & Press Works Ltd. (supra) and the necessity to give importance to the 'purpose test' as discussed in paragraph 4 and elsewhere. The Tribunal also observed that, as per the verdict passed by the Apex Court, "the character of the receipt in the hands of the Assessee, whether r....

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....ष तक (एक लाख या उससे अधिक जनसंख्या वाले शहरों में) या दो वर्ष तक (एक लाख से कम जनसंख्या वाले शहरों में) प्रवेश दरें इस प्रकार रखी गई हों कि वे उस शहर में स्थित अन्य सिनेमाघरों की विभिन्न श्रेणियों की न्यूनतम दरों से कम तथा अधिकतम à¤....