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TMI Blog2013 (2) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. From the combined reading of salient features of the scheme, no doubt in conluding that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee. As decided in Sahney Steel & Press Works Ltd. (1997 (9) TMI 3 - SUPREME COURT) the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy was given. The very purpose of the scheme thus was to give incentive to the multiplex units which were found to be highly capital incentive - uphold the decision of the Tribunal in this respect to treat the exemption as capital. Whether the amount set aside by the assessee to provide for meeting liabilities other than ascertained liabilities was required to be added back while computing the book profit u/s. 115JB or not? - Held that: - As decided in Bharat Earth Movers v. CIT [2000 (8) TMI 4 - SUPREME COURT] the amounts set apart by an assessee to meet its liability on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss operation?" II. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount set aside by the assessee to provide for meeting liabilities other than ascertained liabilities was not required to be added back while computing the book profit u/s. 115JB of the Act?" 3. With respect to question No. 1, the facts are that the respondent-assessee, a company engaged in the business of operating multiplexes and theatres in Pune and Baroda had, during the previous year relevant to the assessment year under consideration, received an amount of Rs. 1,14,47,905/- by way of exemption from payment of entertainment tax relatable to its Baroda multiplex unit. Such exemption was granted by the State Government under a scheme formulated under a Resolution dated 20.12.1995 titled as "New Package Scheme of Incentive for Tourism Projects 1995 to 2000". The assessee claimed that such tax exemption was granted for covering the capital outlay and therefore, such receipt was capital in nature. The Assessing Officer, however, treated such receipt as revenue receipt primarily on the ground that such assistance was granted to the assessee after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case Chaphalkar Bros. (supra). 7. On the other hand, learned counsel, Mr. Soparkar for the assessee opposed the appeals contending that looking to the various terms of the scheme and the purpose for which the incentive was granted, the Tribunal rightly held that the receipt was capital in nature. Counsel relied on the decision of Apex Court in case of Sahney Steel Press Works Ltd. v. CIT [1997] 228 ITR 253 and CIT v. Ponni Sugars Chemicals Ltd. [2008] 306 ITR 392 in support of his contentions. 8. Having thus heard learned counsel for the parties with respect to question No.1, we may notice the relevant features of the incentive scheme of the State Government. The preamble to the resolution records that based on the new tourism policy and in order to give boost to tourism sector by attracting higher investment in the areas with tourism potential and to generate employment opportunities, the State Government has introduced the package scheme of incentives for tourism projects for the period 1995 to 2000. Under Clause 3 of the scheme, only a new tourism unit or expansion of an existing unit was made eligible for incentives. It was further provided that the new projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 50%. Thus, the very eligibility for seeking exemption was linked with new investment being made in fixed capital. Further though the scheme envisaged a certain period spanning for 5 to 10 years during which such exemption could be availed depending on the category of the unit, such exemption would cease the moment the total incentives touched 100% of the eligible capital investments. In other words, the upper limit of total incentive which the unit could receive from the State Government in the form of tax waiver would not exist 100% of the eligible capital investment regardless of the residue of the period of its exemption eligibility as per the scheme. From the combined reading of salient features of the scheme, we have no doubt in our mind that the incentive was being offered for recouping or covering a capital investment or outlay already made by the assessee. 11. In case of Sahney Steel Press Works Ltd. (supra) the Apex Court held and observed that the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy was given. It is of course true that the said decision, certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the object of subsidy was to promote construction of multiplex theater 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 theaters, 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." 15. In this respect also looking to the salient features of the scheme noted above as also the decision of the Bombay High Court interpreting this very scheme in context of the same situation, we uphold the decision of the Tribunal in this respect. 16. Coming to the question No. 2, we notice that the same aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined whether the provision of gratuity liability of a company is required to added back to its book profit. In this context, it was held that the assessee had made the provision for gratuity on the basis of actuarial calculations. He, therefore, cannot be said that the provision for gratuity is not ascertained liability. 18. In case of Bharat Earth Movers v. CIT [2000] 245 ITR 428 the Apex Court held that the amounts set apart by an assessee to meet its liability on account of leave encashment of employees is not a contingent liability. It was observed that what should be certain is the incurring of the liability which should also be estimated with reasonable certainty though the actual quantification may not be possible then. Its requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. 19. Likewise in case of Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53 (SC), the Apex Court examined the question whether it is legitimate in such a scheme of gratuity to estimate the liability on an actuarial valuation and deduct the same in profit and loss account while working out the net ..... X X X X Extracts X X X X X X X X Extracts X X X X
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