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M/S Pratibha Chhari Grah v. C.I.T. - INCOME TAX REFERENCE No. 167 of 1993 [2005] RD-AH 1062 (13 April 2005)


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Court no.37


M/S Pratibha Chhavi Grah, Lucknow. Applicant


Commissioner of Income-tax, Lucknow. Respondent.


Hon'ble R. K. Agrawal, J.

Hon'ble Rajes Kumar, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under section 256 (1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court.

" Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the subsidy granted by the Government for constructing a Cinema in a backward area constitutes a revenue receipt?"

The present Reference relates to the Assessment Year 1984-85.

Briefly stated, the facts giving rise to the present reference are as follows.

Assessee has been assessed to Income Tax in the status of a registered firm. It is engaged in the running of Cinema Hall at Sandila by exhibiting films and also letting out theatre. Return was filed on 31st July, 1984, declaring loss of Rs.82,830/-. However, assessment was framed on 28th November, 1986 on the total income of Rs.34,890/- under section 143 (3) of the Act and addition of Rs.1,17,719/- was made with the following observations.

"The business of the partnership is as in the earlier year- running of Cinema Hall at Sandila by exhibiting of films and also letting out of theatre. The assessee firm started its business on 23.8.1981.By way of incentive, the State Government permitted the theatre owners to retain 75% of entertainment tax in the first year and 50% in the 2nd year. In the F. Year relevant to this A.Y. the assessee realize Rs.1,17,719/- by way of subsidy. Instead of crediting this in the P & L account alongwith the entertainment tax payable, the assessee created an Entertainment tax rebate reserve and took this amount directly to the B/s. As has been held in the A.Y. 82-83, the subsidy received by the assessee arose in the course of business, as it is given to recoup revenue expenditure, I hold that collection retained by the assessee every week from the entertainment tax collected in full constitutes revenue receipt in the hand of the assessee."

Feeling aggrieved, assessee preferred appeal before the Deputy Commissioner of Income Tax (Appeals), who had allowed the appeal and upheld the contention of the assessee that the amount of subsidy received by it does not form part of the revenue receipt. Revenue, feeling aggrieved, preferred appeal before the Tribunal. The Tribunal has allowed the appeal by holding that the subsidy is Revenue receipt.

We have heard Sri Shakeel Ahmad, learned counsel for the assessee and Sri A.N.Mahajan, learned Standing Counsel for the Revenue.

We find that this Court in similar circumstances, in I.T.R. No. 46 of 1995 Kalpana Palace Versus Commissioner of Income Tax, Kanpur decided  on 18th August, 2004 has answered similar question in favour of the assessee and against the Revenue.

Respectfully, following the aforesaid decision, we answer the question referred to us in the negative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.




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