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TMI Blog2004 (8) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Appellate Tribunal was justified in law in holding that the grant-in-aid of Rs. 3,06,711 received by the assessee under the scheme of the State of U.P. introduced with the object to promote the construction of permanent cinema buildings in the backward areas as revenue receipt in the hands of the assessee?" In the Income-tax Appeal No. 5 of 2001, the appellant had raised five questions of law which, according to it, are substantial questions of law. However, the decision on the question referred by the Tribunal under section 256(1) of the Act would also decide the aforementioned income-tax appeal. The reference and the appeal, as they raise a common question of law, have been heard together and are being decided by a common judgment. For the sake of brevity, the facts of Income-tax Reference No. 46 of 1995 are given below: The applicant is a registered partnership firm and is engaged in the business of cinema exhibition. During the relevant assessment year 1990-91, the cinema building was completed and business was started. For the assessment year 1990-91, it had filed the return on August 29, 1990, showing a loss of Rs. 2,57,830 and subsequently it had filed a revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) CIT v. Meat Products of India Ltd. [1999] 238 ITR 987 (Ker); and (3) CIT v. Balarampur Chini Mills Ltd. [1999] 238 ITR 445 (Cal). Sri Shambhu Chopra, learned counsel for the Revenue, however, submitted that as the grant-in-aid/subsidy was correlated with the amount of entertainment tax it was nothing but a trade receipt and the Tribunal was justified in holding so. He also relied upon the decision of the apex court in the case of Sahney Steel and Press Works Ltd. [1997] 228 ITR 253. Having heard learned counsel for the parties we find that the State Government had issued the Government order dated July 21, 1986, for providing grant-in-aid and incentives for construction of permanent cinema halls during a specified period. The subject of the Government order dated July 21, 1986, is reproduced below: "Sthayee cinema grihon ke nirman ko protsahan dive jane ke vishishta avadhi men banaye gaye sthayee cinema bhavanon ko sahayak anudan sweekrita kiye jane ki yojana ka Vistar." In paragraph 1 of the aforesaid Government order it has been specifically stated that the intention for grant-in-aid is for encouraging construction of new cinema halls. However, grant-in-aid is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, levied by the State Government subject to a maximum of 10 per cent. of the equity capital paid-up in the case of public limited companies and the actual capital in the case of others; (b) Subsidy on power consumed for production to the extent of 10 per cent in the case of medium and large-scale industries and 121/2 per cent. in the case of small-scale industries. This concession will not apply to cases where concessional tariffs are allowed by the electricity board; (c) Exemption from payment of water rate on water drawn from sources not maintained at the cost of Government or any local body; (d) Refund of water rate in respect of water drawn from a Government source or from a source maintained by any local body but returned purified to it; (e) Liability on account of assessment of land revenue or taxes on land used for establishment of any industry, shall be limited to the amount of such taxes payable immediately before the land is so used; (f) The following additional incentives will be allowed to new industrial units set up in the ayacut areas of Nagarjunasagar, Pochamad and K.C. Canal in the Ramagundam-Kothagudem areas and in the following eight backward districts; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the object of various assistances under the subsidy scheme was to enable the assessee to run the business more profitably. The apex court further held as follows: "In the case before us, payments were made only after the industries have been set up. Payments are not being made for the purpose of setting up of the industries. But the package of incentives were given to the industries to run more profitably for a period of five years from the date of the commencement of production. In other words, a helping hand was being provided to the industries during the early days to enable them to come to a competitive level with other established industries.... By no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges be treated as an aid to the setting up of the industry of the assessee. As we have seen earlier, the payments were to be made only if and when the assessee commenced its production. The said payments were made for a period of five years calculated from the date of commencement of production in the assessee's factory. The subsidies are operational subsidies and not capital subsidies." Applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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