Commissioner of Income Tax vs Abhishek Cineco (P.) Ltd.

B.A. Khan, J.—The revenue has filed this application u/s 256(2) of the income tax Act, 1961 (''the Act'') for requiring the Tribunal to refer the following two questions, stated to be questions of law arising out of its order, dated 16-8-1995 :

" 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 4,48,819 received by the assessee as subsidy was receipt of capital nature ?

Whether, on the facts and in the circumstances of the case, the Tribunal had evidence before it to hold that there was no nexus between the receipts and business activities of the assessee so as to hold the amount as not a revenue receipt ?"

The assessee is engaged in business of exhibition of films and running of cinema halls. He is said to have received sum of Rs. 4,48,819 in the accounting year relevant to the assessment year 1989-90 as subsidy under the scheme framed by the State Government called "Grant-in-aid Rules of Incentive Planning for construction of new Cinema Halls in M.P. 1982". He claimed it as a capital receipt which was not accepted by the Assessing Officer. He declared it as a revenue receipt and, thus, taxable. He consequently took an appeal before the Commissioner (Appeals) but failed. He then carried a further appeal to the Tribunal and succeeded there.

The Tribunal referring to some judgments on the subject-matter concluded that the revenue authorities had erred in treating the disputed amount as revenue receipt. The revenue thereafter filed an application u/s 256(1) asking the Tribunal to refer the above-stated questions for opinion of this Court which was rejected. Hence, this application u/s 256(2) for asking the Tribunal to make the requisite reference. Having regard to the judgment of the Supreme Court in Sahney Steel & Press Works Ltd. v. CIT [1997] 228 ITR 2531 laying down the test for determination of whether a particular subsidy received is to be treated as a capital receipt or a revenue receipt and also the judgment of this Court in Commissioner of Income Tax Vs. Dusad Industries, and also that provisions of the scheme in question required appreciation, we deem it appropriate to direct the Tribunal to refer question No. 1 and to submit the statement of case for opinion of this Court. The other question which is by and large covered by first one need not be referred.

Application is disposed of.