2023 (6) TMI 881 - AT - Income Tax

Entertainment tax exemption in respect of Multiplexes - Nature of receipt - whether capital or revenue receipts? - object of respective subsidy schemes of State Governments - HELD THAT - As gone through the judgment passed by the Hon ble Apex Court Chaphalkar Brothers Pune 2017 (12) TMI 816 - SUPREME COURT wherein issue has been decided in favour of the assessee by upholding the order passed by the Hon ble Bombay High Court 2013 (6) TMI 73 - BOMBAY HIGH COURT to this effect that where object of respective subsidy schemes of State Governments was to encourage development of Multiple Theatre Complexes, incentives has been held to be capital in nature and not revenue receipts. Thus, CIT(A) has rightly held in favour of the assessee.

Summary

Issues involved:
The judgment involves the treatment of entertainment tax exemption as a capital receipt not eligible for tax under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2012-13.

Entertainment tax exemption as capital receipt:
The appeal filed by the Revenue challenged the Ld. CIT(Appeals) decision treating entertainment tax exemption as a capital receipt of Rs. 9,89,90,747/- not eligible for tax. The Co-ordinate Bench allowed the Miscellaneous Application for adjudication of this ground. The assessee, engaged in the entertainment industry, claimed the subsidy received was after completion of the cinema house and used entirely for business operations, hence revenue in nature. The Ld. CIT(A) relied on earlier appellate orders and held the exemption as capital receipt, deleting the addition. The Ld. Senior Counsel cited judgments from the Hon'ble Supreme Court and Gujarat High Court in favor of the assessee. The Bench, considering the subsidy schemes to encourage development of Theatre Complexes, upheld the Ld. CIT(A)'s decision based on precedents from different High Courts and the Hon'ble Apex Court. The Revenue's appeal was dismissed as devoid of merit.

Conclusion:
The Appellate Tribunal ITAT Ahmedabad upheld the decision treating entertainment tax exemption as a capital receipt not eligible for tax, based on precedents and the object of subsidy schemes to promote development of Theatre Complexes. The Revenue's appeal was dismissed on 16/06/2023.