Friday, May 9, 2014

Subsidy provided by Govt. to theater owners in form of entertainment tax was capital receipt


Facts: a)The assessee was running a cinema hall. It had shown certain receipts, which included entertainment tax.

b)In the profit and loss account, the assessee had transferred a part of receipts to entertainment subsidy account and claimed it as exempt from tax being in the nature of capital receipts. The Assessing Officer treated said receipt as income of assessee.

c)The CIT (A), however, deleted the entire addition by treating the entertainment subsidy as a capital receipt. The Tribunal upheld the order of the CIT (A). The aggrieved-revenue filed the instant appeal.

The High Court held in favour of assessee as under: 1)In the instant case, it was apparent that the State Government proceeded to exempt entertainment tax for a period of 5 years payable by a "new" cinema hall; subject to the condition that commercial exhibition of films in such cinema hall was required to be started by 31-3-2000.

2)Merely because the amount was not directly meant for repaying the amount taken for construction of the cinema hall, its purpose could not be considered to be other than that of promoting construction of new cinema hall.

3)The submission that once the assessee had collected the entertainment tax and had not deposited the same with the Government, it was to be treated as revenue receipt remained devoid of substance.

4)The remission by the Government had been to the proprietor of the entertainment and not to the person admitted to the entertainment. The remission had been the methodology adopted by the State Government to provide assistance to the new cinema hall; and had been essentially in the nature of a subsidy, i.e., the assistance from the Government to the new cinema hall. Thus, the entertainment subsidy was to be treated as capital receipts. – CIT V. SAMTA CHAVIGARH [2014] 44 taxmann.com 337 (Rajasthan)

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