Subsidy by State Government for development of new Multiplexes is capital in nature

PVR Ltd. Vs ACIT (ITAT Delhi)

ITAT Delhi held that incentive / subsidy given by state Governments on account of development of new Multiplexes in the state is capital receipt.

Facts- The issue involved here is 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.

Conclusion- Hon’ble Bombay High Court in the case M/s Chapalkar Brothers 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.

Held that Hon’ble Bombay High Court in M/s Chapalkar Brothers and that of Hon’ble Supreme Court judgment in the case of Ponni Sugars & Chemicals Ltd. which has approved many such judgments cited in the body of the order, we hold that the subsidy received by the assessee is capital in nature.

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