Commissioner of Income Tax vs Ajanta Talkies

1.This is an application u/s 256(2) of the IT Act of Revenue with a request to this Court to answer the following question of law referred by Tribunal. The same is reproduced herein :

"Whether, on the facts and in the circumstances of the case, Tribunal was justified in law in holding that the assessee was correct in claiming entertainment tax subsidy as capital receipt ?"

Learned counsel for the applicant/Revenue submitted that this question has been answered by the judgment of the Supreme Court in Commissioner of Income Tax Vs. Rajaram Maize Products, . In fact, the aforesaid judgment is based on earlier judgment of the Supreme Court in M/s. Sahney Steel and Press Works Ltd., Hyderabad etc. etc. Vs. Commissioner of Income Tax, Andhra Pradesh-I, Hyderabad, in which it has been held that subsidies are revenue receipts and have to be taxed, accordingly.

In the present case, the assessee had received entertainment tax subsidy. Thus, on applying aforesaid ratio of the Supreme Court as mentioned above in two cases, we hold that it will be a revenue receipt and not capital in the hands of the assessee. Thus, we answer the question in favour of the Revenue and against the assessee. Accordingly, this matter is finally disposed of but with no order as to costs.