9911796707
TMI Blog2023 (11) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount of E Tax as revenue receipt as against capital receipt claimed by the assessee and accepted by the Ld.AO is based on erroneous views and / or non-appreciation of the facts and law involved including the law as laid down by the apex court in the case of CIT V. Ponni Sugar and Chemicals Ltd., 306 ITR 392. 3. That the treatment of the said amount of E Tax as revenue receipt a against capital receipt claimed by the assessee and accepted by th Ld.AO, is inconsistent inter alia with the view of the Hon'ble High Court Allahabad and Karnataka where similar grant in aid of E Tax has been h as capital receipt. 4. That the Ld. CIT (A) has erred in not appreciating that the assessee is the proprietor/manager of the multiplex as per State Entertainment Tax Act. As such the treatment of the subject E Tax subsidy as of revenue nature on the ground that the assessee is not the owner of the multiplexes and the subsidy is meant for the owner of the multiplex is unlawful and deserves to be deleted in toto, 5. That the Ld. CIT(A) has erred on facts and in law in not allowing the assessee's alternative claim that in case the said amount of E Tax is treated as income, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook profit for the purposes of MAT u/s 115JB unless the same are covered under the explanation to section 115JB of the Act. Depreciation has been debited in the profit and loss account as per applicable accounting standards and is not covered und any of the adjustments mentioned in the explanation to section 115JB. T addition to book profit as made by the Ld. AO is liable to be deleted. 12. That the assessment as made and the order of the Ld. CIT(A) are aga the law and facts of the case involved. 13. That the grounds of appeal as herein are without prejudice to each other. 14. That the assessee respectfully craves leave to add, amend alter and / or forego any ground(s) at or before the time of hearing. 3. Ground Nos.1 to 4 relates to the issue whether Entertainment tax collected and retained by assessee as incentive / subsidy given by state Governments on account of development of new Multiplexes in the state is capital or revenue receipt. 4. At the very outset the Counsel for the assessee stated that this issue is no more resintegra as it has been decided by this Tribunal in favour of the assessee and against the revenue in A.Y. 2006-07 in ITA No.1897/Del/2010. 5. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (c) The amount of subsidy was only quantified to the limit of cost of asset and the amount of entertainment tax collected by the assessee. (d) The benefit is given on the basis of collecting the E. Tax from the cinema viewers, which is a trading receipt. Retaining it and not paying a trading receipt to the Govt. amounts to revenue receipt. (e) Since the entertainment subsidy is trading receipt the consequent subsidy will be revenue in nature only. (iii) The assessee in the original return had offered the amount as revenue receipt. In our considered view as the facts emerge. the multiplex scheme of the U.P. Govt, came by way of amending rules of the earlier Cinematographic Act. Earlier the incentives were given for construction of new cinema halls and by new scheme it was given for construction of multiplexes. (iv) In the cases of Pramod Kumar Shukla; Sharda Chitra Mandir: Kalpana Palace; and Sadichha Chitra (supra), such type of subsidy for construction of new cinema halls, has been held by Hon'ble Allahabad and Bombay High Court to be capital in nature. (v) In our view the Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. (supra) has laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ources which in this case is cinema viewers or thereby entertainment tax collection. The scheme was designed to promote the investors in entertainment industry to establish new multiplexes. The object and purpose is to promote ailing cinema industry as a whole, In our considered view, Hon'ble Supreme Court judgment in Ponni Sugars & Chemicals Ltd, (supra) answers the question before us and is fully applicable to assessee's case. (ix) The issue is further clinched by Hon'ble Bombay High Court in the case M/s Chapalkar Brothers (supra), which has clearly held the subsidy given for construction of multiplexes to be capital in nature and merely because it was linked to entertainment subsidy and not with repayment of loans, cannot be held to be revenue in nature. (x) Facts in the case of Sahney Steel & Press Works Ltd. Vs. CIT (1997) 228 ITR 253 (SC), relied on by ld. DR, are on different footing. In that ease incentives were production incentives in the sense that ass was entitled to such incentives only after it went into production. The scheme was not to make any payment directly or indirectly for the setting up of the industries. It was only after the industries had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature, has given a finding that the subsidy was not relatable to any specific asset of the multiplex. 13.5. Department cannot aprobate and reprobate on the same issue. While stressing the subsidy as revenue in nature both ld. CIT(Appeals) and ld. "CIT(DR) have offered a view that subsidy was not intended to be utilized in specified manner. The view make it clear that the subsidy was not provided for meeting the cost of any asset. 13.6. In view of these facts and circumstances, we hold that E. Tax subsidy was not given to meet the cost of any specific asset. Our view is further fortified by the coordinate Bench judgment in the case of Sasisri Extractions Ltd. (supra) in which case incentive subsidy received for setting up of new unit for manufacture of edible oils was held to be not meant to directly or Indirectly reduce the cost of any asset was linked with the capital , only because the amount of subsidy cost of assets. 13.7. In view of Hon'ble Supreme Court judgment in the case of Chemicals Ltd. (supra); ITAT Vishakhapatnam Bench judgment in the case of Sasisri Extractions Ltd. (supra) and the department itself proposed that there was no obligation on assessee to ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low the vesting of 25% of the options. It is well settled in law that if a business liability has arisen in the accounting year, the same is permissible as deduction, even though, liability may have to quantify and discharged at a future date. On exercise of option by an employee, the actual amount of benefit has to be determined is only a quantification of liability, which takes place at a future date. The tribunal has therefore, rightly placed reliance on decisions of the Supreme Court in Bharat Movers supra and Rotork Controls India P Ltd., supra and has recorded a finding that discount on issue of ESOPs is not a contingent liability but is an ascertained liability. 10. From perusal of section 37(1), which has been referred to supra, it is evident that an assessee is of ESOPs is not a contingent liability but is an ascertained liability. entitled to claim deduction under the aforesaid provision if the expenditure has been incurred. The expression expenditure' will also include a loss and therefore, issuance of shares at a discount where the assessee absorbs the difference between the price at which it is issued and the market value of the shares would also be expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e light of decision of the Hon'ble High Court of Delhi (supra) we direct the AO to delete the impugned disallowance of Rs. 640823/-. Ground No.9 allowed. 16. Ground No.10 and 11 relates to the disallowance of depreciation under normal provisions permitted to be adjusted in book profit u/s.115JB of the Act by the AO. 17. After pursuing the assessment order we are of the considered view that the AO does not have jurisdiction to go beyond net profit shown in P & L account except to the extent profit in explanation of section 115JB of the Act. As held by the Hon'ble Supreme Court in the case of Apollo Tyres 255 ITR 273, Malayala Manorama Co. Ltd 300 ITR 0251. 18. Respectfully following the ratio laiddown by the Hon'ble Supreme Court we direct the AO not to consider the impugned disallowance of depreciation for the computation of book profit u/s. 115JB of the Act. Similar would be the fate of disallowances u/s. 14A read with rule 8D though we have deleted the same vide ground No.9 of the appeal. Ground No.10 and 11 read with ground No.9 are allowed. 19. Additional ground is in relation to the Entertainment tax subsidy whether to be excluded from book profit for MAT purposes. 20. Qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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