1.  Commissioner of Income Tax Vs Bougainvillea Multiplex Entertainment Centre Pvt. Ltd.  I.T.A. No. 586/2013, Date of Pronouncement: 30.01.2015, High Court of Delhi

Issue:

Whether the entertainment tax subsidy granted to the assessee engaged in the business of running of multiplex cinema halls and shopping malls is a capital receipt?

Brief Facts:

The respondent assessee is engaged in the business of running of multiplex cinema halls and shopping malls and has been the beneficiary of a scheme promulgated by the State Government with the objective of encouraging setting up of such multiplex cinema halls where under it has been granted exemption from entertainment tax payment. It claimed deduction to the extent of entertainment tax collected in the corresponding financial years terming the amounts as capital receipts. The Assessing Officer disallowed the said claims.

Held:

The subsidy is meant to liquidate the cost incurred in setting up of the multiplex cinema hall and for making it operational by installing the requisite apparatus. The character of the subsidy is to be determined having regard to the purpose for which it is granted. The assistance in the form of entertainment tax exemption is shown to have come in the hands of assessee to enable it to set up the new unit which renders it a receipt on capital account. The periodicity (year to year) of the subsidy, its source (collections from the public at large) and the form (deemed deposit) are irrelevant considerations. It appears that there has been no exercise undertaken to find on facts as to the expenditure incurred by the assessee in the cost of construction and setting up of the cinema hall to make it functional so as to assess the extent of capital subsidy it can claim over the assessment years in question on account of entertainment tax exemptions. Thus, while dismissing the appeals of the Revenue, we direct the Assessing Officer to do the needful.

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2.  M/s Daga Global Chemicals Pvt. Ltd. Vs Asst. Commissioner Income Tax, I.T.A. No. 5592/MUM/2012, Date of Pronouncement: 01.01.2015, ITAT - Mumbai

Issue:

Whether disallowance u/s 14A r.w. Rule 8D can exceed the exempt income claimed. Held: No

Brief facts:

The assessee is a limited company, engaged in trading of bulk and fine, chemicals, solvent and pharmaceutical raw materials. The assessee credited dividend income of Rs.1,82,262/- in its profit and loss account. The Assessing Officer while framing the assessment invoke section 14A r.w. Rule 8D by contending that assessee claimed various expenses which are related to exempt income in its profit & loss account and disallowed Rs.14,58,412/-.

Held:

The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. What it may be, we find that the assessee only received Rs.1,82,362/- as dividend income, therefore, there is no question of disallowance of Rs.14,58.412/- by nvoking section 14A r.w. Rule 8D under the facts available on record. Disallowance u/s 14A r.w. Rule 8D cannot exceed the exempt income. In view of this fact, we find merit in the claim of the assessee. The appeal of the assessee is therefore, allowed.

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