Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

May 2013

Capital or revenue receipt: Entertainment subsidy: Object of subsidy to promote cinema houses by constructing Multiplex Theatres: Subsidy is capital receipt:

By K. B. Bhujle, Advocate
Reading Time 2 mins
fiogf49gjkf0d
CIT vs. Chaphalkar Bros.; 351 ITR 309 (Bom):

The following question was raised before the Bombay High Court in this case:

“Whether the entertainment duty subsidy given to the assessee by the State Government for construction of multiplexes is in the nature of revenue receipt or capital receipt?”

The High Court held as under:

“i) The purpose for which the subsidy was given is the relevant factor and if the object of subsidy was to enable the assessee to setup a new unit then the receipt of subsidy would be on capital account.

ii) Since the object of the subsidy was to promote construction of multiplex theatre complexes, the subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes should not be ground to hold that the subsidy receipt was on revenue account because if the object of the scheme was to promote cinema houses by constructing multiplex theatres, irrespective of whether the multiplexes had been constructed out of the assessee’s own funds or borrowed funds, the receipt of subsidy would be on capital account.

iii) Therefore, the decision of the Tribunal that the amount of subsidy received by the assessee is on capital account could not be faulted.”

Download PDF

You May Also Like

Capital gains: Exemption u/s. 54/54F: A. Y. 2007-08: A residential house includes a building with a basement, ground floor, first floor and second floor constituting two residential units: Exemption allowable:

Capital or revenue receipt: A. Y. 2003-04: Business of Multiplexes and Theatres: Exemption from entertainment tax under Scheme of Incentive for Tourism Project, 1995 to 2000 for giving boost to tourism sector: Scheme offering incentive for recouping or covering capital investment: