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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Date of Hearing – 19.02.2018 Date of Order – 28.02.2018
O R D E R PER BENCH
This bunch consists of three appeals by the assessee and one appeal by the Revenue against two separate orders, both dated 28th October 2015, passed by the learned Commissioner (Appeals)–6, Mumbai. While appeals for the assessment years 2008–09 and 2009– 10 are by the assessee only, there are cross appeals for assessment year 2011–12. Since, these appeals pertain to the same assessee involving common issue arising out of identical set of facts and circumstances, therefore, as a matter of convenience, these appeals
3 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] were heard together and are being disposed off by way of this consolidated order. ./2015 – A.Y. 2008–09 and ITA no.5769/Mum./2015 – A.Y. 2009–10 Assessee’s Appeals
Grounds raised in these two appeals are identical except the figures. Therefore, for the sake of convenience, the grounds raised in ITA no.5768/Mum./2015 are reproduced hereunder:–
“1. The learned CIT(A) erred in law and on facts in upholding the issuance of notice under section 148 r/w section 147 of the Act. Appellant prays that the assessment order passed under section 143(3) r/w section 147 based on mere change of opinion should be quashed being bad–in–law; 2. The learned CIT(A) erred in law and on facts in holding that though the subsidy received is a capital receipt the same has to be reduced from the WDV of the books of assets and to allow the depreciation on the reduced value of WDV accordingly. Appellant prays that the subsidy collected in the form entertainment duty of ` 6,08,46,243 during the year under consideration should be treated as capital receipt and not liable to be reduced from WDV of block of assets for allowance of depreciation; and 3. Appellant craves to leave, to add, to alter, to amend or to modify all or any of the ground of appeal.”
3. In addition to the aforesaid grounds raised in the memorandum of appeals, the assessee has raised following common additional grounds in both the appeals:–
4. That the notice issued under section 148 of the Act and the re– assessment order passed under section 143(3) r/w section 147 of the Act are illegal, bad–in–law and without jurisdiction;
4 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.]
5. That the reasons recorded are not based on any tangible material and as such the notice issued under section 148 is illegal, bad–in–law and without jurisdiction; 6. That in view of the facts and circumstances of the case, in the absence of any fresh material, the reasons recorded, notice issued under section 148 and re–assessment are illegal, bad–in–law and without jurisdiction.”
Since grounds no.4, 5 and 6 raised as additional grounds are only extension of main ground no.1 and further, since, the issues raised in these grounds are purely legal and jurisdictional issues going to the root of the matter and can be decided on the basis of facts available on record, we admit the additional grounds for adjudication.
As stated earlier, in grounds no.1, 4, 5 and 6, the assessee has challenged the validity of the assessment order passed under section 143(3) r/w section 147 of the Act. In ground no.2, assessee has challenged the reduction of entertainment tax subsidy from the cost of assets for the purpose of depreciation.
Brief facts are, the assessee is a company engaged in the business of multiplex theatre. For the assessment year under dispute, the assessee filed its return of income on 23rd September 2008, declaring total income of ` 7,25,29,883 under the normal provisions and book profit of ` 7,65,62,158 under section 115JB of the Act. The return of income filed by the assessee was selected for scrutiny and 5 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] assessment order under section 143(3) of the Act was originally passed on 10th December 2010 determining the total income at ` 8,36,49,253. Subsequently, the Assessing Officer being of the opinion that in view of subsidy on entertainment tax granted by the State Government the cost of acquisition of all the assets on which the assessee has claimed depreciation has become nil as per section 43(1), the allowance of depreciation to the assessee on such assets has resulted in escapement of income. Accordingly, he re–opened the assessment under section 147 of the Act by issuing notice under section 148 on 16th March 2013 and ultimately passed the assessment order under section 143(3) r/w section 147 of the Act disallowing depreciation claimed of ` 81,95,591 by the assessee. The assessment order so passed was challenged before the first appellate authority, inter–alia, on the ground of validity of re–opening of assessment under section 147 of the Act. However, the learned Commissioner (Appeals) did not find merit in the submissions of the assessee with regard to assessee’s challenge on the issue of re–opening of assessment.
Learned Authorised Representative submitted, during the original assessment proceedings the Assessing Officer has specifically enquired into and examined the issue relating to the nature of reimbursement of entertainment tax collected and also the applicability of section 43(1). He submitted, after examining the issue in detail and keeping in 6 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] view the submissions made by the assessee the Assessing Officer completed assessment by holding that the entertainment tax subsidy received by the assessee was of revenue nature, hence, to be treated as income. Learned Authorised Representative submitted, the Assessing Officer having enquired into and examined the issue in the original assessment proceedings, in the absence of any tangible and fresh material coming to the possession of the Assessing Officer assessment cannot be re–opened merely on a change of opinion. The learned Authorised Representative submitted, post original assessment proceedings no fresh material has come to the possession of the Assessing Officer to form a belief that income has escaped assessment. Only on re–examination of the materials available on record and considered in the original assessment proceedings the Assessing Officer has re–opened the assessment which is legally impermissible. In support of his contention, the learned Authorised Representative relied upon the following decisions:–
i) CIT v/s Kelvinator of India, 320 ITR 561; ii) Hindustan Liver Ltd v/s R.B. Wadkar, 268 ITR 332; iii) Sabh Infrastructures Ltd. v/s ACIT, 398 ITR 198; iv) Indulata Rangwala v/s DCIT, 384 ITR 337; and v) NDT Systems v/s ITO, 363 ITR 603.
7 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.]
Learned Authorised Representative submitted, even otherwise also the issue on which the assessment was re–opened under section 147 of the Act having already been decided in favour of the assessee the re–opening under section 147 of the Act becomes a futile exercise. He submitted, so far as the nature of entertainment tax subsidy is concerned, there cannot be any manner of doubt that it is in the nature of capital receipt, hence, not taxable. He submitted, not only the Hon’ble Supreme Court in case of CIT v/s Chaphalkar Brothers, [2018] 400 ITR 279, has held the entertainment tax subsidy provided by the Government to multiplex theatre complexes as capital in nature, but, the Hon'ble Jurisdictional High Court in assessee’s own case has also held so. He submitted, in so far as the issue whether entertainment tax subsidy should be reduced from the cost of assets in terms of Explanation 10 to section 43(1) for computing depreciation is concerned, the Tribunal in assessee’s own case for assessment year 2010–11 in ITA no.6954/Mum./2013 dated 22nd April 2016, has decided the issue in favour of the assessee following other decisions of the same bench including the decision in case of assessee’s sister concern. Therefore, the learned Authorised Representative submitted, the impugned assessment order cannot be sustained both on legal ground as well as on merits.
8 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.]
Learned Departmental Representative submitted, the issue whether the entertainment tax subsidy is to be reduced from the cost of asset under section 43(1) of the Act for computing depreciation was never examined by the Assessing Officer in the original assessment proceedings, since, he treated the entertainment tax subsidy received by the assessee as revenue receipt. She submitted, that being the case, there is no change of opinion while re–opening of assessment. As far as the merits of the issue are concerned the learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals).
We have heard rival submissions and perused material available on record. We have also applied our mind to the decisions relied upon. Undisputedly, in the relevant previous year the assessee has received the entertainment tax collected by it from the multiplexes as subsidy as per the scheme of Maharashtra Government. In the course of the original assessment proceedings, the Assessing Officer specifically enquired into and examined not only the nature and character of the entertainment tax subsidy received by the assessee, whether revenue or capital, but he also raised query with regard to applicability of section 43(1). This is very much evident from the original assessment order dated 10th December 2010, passed under section 143(3), a copy of which is at Page–48 of the paper book. After issuing a show cause
9 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] notice to the assessee and inviting assessee’s reply both on the issue of nature of receipt as well as applicability of section 43(1) Explanation 10, the Assessing Officer on examining the submissions of the assessee as well as various aspects of the issue in his own wisdom treated the entertainment tax subsidy received by the assessee as revenue in nature and accordingly, added it to the income of the assessee. Therefore, it is evident that the Assessing Officer has examined the issue of applicability of section 43(1) Explanation 10 during the original assessment. From the reasons recorded for re– opening of assessment under section 147 of the Act which is reproduced by the Assessing Officer in the impugned assessment order it is evident that the formation of belief for escapement of income is on the reason that the entertainment tax subsidy received by the assessee should be reduced from cost of assets, thereby, no depreciation is allowable to the assessee on such assets. From the reasons recorded, it is very much evident that at the time of recording of reasons for re–opening of assessment no fresh tangible material was available with the Assessing Officer. On mere re–visit and re– appraisal of the materials already available on record and considered by the Assessing Officer in original assessment proceedings, the Assessing Officer formed an opinion that income has escaped assessment. Thus, it is patent and obvious that the re–opening of 10 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] assessment is on a mere change of opinion. Though, the Assessing Officer in the original assessment proceedings, has not expressed any opinion with regard to the applicability of Explanation 10 to section 423(1), however, it is evident that he had examined the issue in the original assessment proceedings. If he had any doubt he certainly would have mentioned in the assessment order that in the event of the receipt being held as capital in nature, the subsidy received should have been reduced from the actual cost for computing depreciation. Having not stated so in the original assessment order cannot lead to the conclusion that the Assessing Officer has considered the issue at all. That being the case, in the absence of any fresh tangible material, the re–opening of assessment under section 147 in the present case is invalid as it tantamounts to re–opening on a mere change of opinion. The decision relied upon by the learned Authorised Representative squarely support this view. Therefore, we have no hesitation in holding that the impugned assessment order passed under section 143(3) r/w section 147 of the Act is legally unsustainable, hence, deserves to be quashed. Having held so, though, it is not necessary to delve into the merits of the issue, however, considering the fact that we have heard the parties on merits and it is a recurring issue between the parties even in the subsequent assessment year, we proceed to deal with the merits as well. It is evident, the Departmental Authorities have 11 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] disallowed assessee’s claim of depreciation on the reasoning that the entertainment tax subsidy being in the nature of capital receipt should be reduced from the cost of asset in terms of Explanation 10 to section 43(1) for computing depreciation. However, as brought to our notice by the learned Authorised Representative, in assessee’s own case for the assessment year 2010–11, the Tribunal while deciding identical issue followed other decisions of the Co–ordinate Bench and held that entertainment tax subsidy cannot be reduced from the cost of assets for computing depreciation and accordingly allowed assessee’s claim of depreciation. The learned Departmental Representative having not brought to our notice any material difference in facts or any contrary decision, adhering to the norms of judicial discipline we follow the decision of the Co–ordinate Bench in assessee’s own case for assessment year 2010–11 as referred to above and allow assessee’s claim of depreciation. Therefore, grounds raised are allowed.
In the result, assessee’s appeals for A.Y. 2008–09 and 2009–10 are allowed. ./2015 Assessee’s Appeals for A.Y. 2011–12
The only effective ground raised by the assessee reads as under:–
12 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.]
“Appellant prays that the entertainment tax of ` 4,44,52,684 collected during the year under consideration cannot be reduced from the WDV and block of assets for the purpose of claim of depreciation by applying Explanation 10 to sec. 43(1) of the Act.”
While deciding the issue raised in ground no.2 by the assessee in its appeal being ITA no.5768/Mum./2015, we have allowed assessee’s claim of depreciation. Following our decision therein vide Para–10 above, we allow assessee’s claim of depreciation. Ground raised is allowed.
In the result, assessee’s appeal for A.Y. 2011–12 is allowed. ./2016 Revenue’s Appeal for A.Y. 2011–12
The only effective ground raised by the Revenue reads as under:–
“On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the addition made by the Assessing Officer on account of entertainment tax holding that non–payment of entertainment tax collected from the customers constitutes subsidy from the State Government and is a capital receipt and not a revenue receipt.”
Brief facts are, while completing the assessment for the impugned assessment year, the Assessing Officer treated the entertainment tax subsidy received by the assessee from the State Government amounting to ` 4,44,52,684, as revenue in nature and 13 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.] added back to the income of the assessee. However, the first appellate authority relying upon his own decision and the decisions of the Tribunal in assessee’s own case for earlier assessment years held the entertainment tax subsidy received by the assessee to be capital receipt, hence, not taxable.
We have heard rival submissions and perused material available on record. As discussed in the earlier part of order, in assessee’s own case for assessment years 2008–09 and 2009–10, the Hon'ble Jurisdictional High Court while dismissing the Revenue’s appeal has upheld the decision of the Tribunal in treating the entertainment tax subsidy received by the assessee from the State Government as capital receipt. The Tribunal has again reiterated the same view in assessee’s own case for assessment year 2010–11 in Mum./2013, dated 20th July 2016. In fact, the issue relating to the nature of entertainment tax subsidy given to multiplexes theatre by the State Government has attained finality by the decision of the Hon'ble Supreme Court in Chaphalkar Brothers (supra), wherein the Hon'ble Supreme Court considering the very same issue relating to the nature of entertainment tax subsidy granted by the State Government has held it to be of capital in nature. In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) on the issue. Ground raised is dismissed.
14 M/s. Vista Entertainment Pvt. Ltd. [Now M/s. PVR Ltd.]
In the result, Revenue’s appeal for A.Y. 2011–12 is dismissed.
To sum up, assessee’s appeals for A.Ys 2008–09, 2009–10 and 2011–12 are allowed and Revenue’s appeal for A.Y. 2011–12 is dismissed.
Order pronounced in the open Court on 28.02.2018