Entertainment Tax - When a subsidy scheme was designed to promote capital intensive projects in State, such subsidy is necessarily capital in nature: SC
By TIOL News Service
NEW DELHI, DEC 14, 2017: THE issue before the Bench is - Whether when a subsidy scheme was designed to promote capital intensive projects in the State, such subsidy is necessarily capital in nature. YES is the verdict.
Facts of the case
The present appeal was filed by the Department challenging the assessment order passed by the High Court, wherein the High Court referred to the background of the incentive scheme and stated that the Sampat Committee was set up to examine the question relating to the economic viability of new sugar factories. Thereafter, the said Committee stated five possible incentives for making a sugar plant economically viable could be provided, out of which two of such incentives (1980 and 1987 Schemes) was the subject-matter for decision. After following the case of the Sahney Steel & Press Works Ltd. and Ponni Sugars and Chemicals Limited, the Court was satisfied that the payment received by the Assessee under the subsidy scheme was not in the nature of a helping hand to the trade but was capital in nature.
On appeal, the Apex Court held that,
++ these complexes are highly capital intensive and their gestation period is quite long and therefore, they need Government support in the form of incentives qua entertainment duty. Government with a view to commemorate the birth centenary of late Shri V. Shantaram decided to grant concession in entertainment duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State. The said object is clear and unequivocal. The object of the grant of the subsidy was in order that persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept the argument that it is only the immediate object and not the larger object which must be kept in mind that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel;
++ the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. The Counsel for the assessee pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered by the judgment in Ponni Sugars, and the appeals were, therefore, dismissed;
++ the finding of the J&K High Court on the facts of the incentive subsidy contained in that case is absolutely correct. In that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that the subsidy took a particular form and the fact that it was granted only after commencement of production would make no difference;
++ since the subsidy scheme in the West Bengal case is similar to the scheme in the Maharashtra case being to encourage development of Multiplex Theatre Complexes which are capital intensive in nature, and since the subsidy scheme in that case is also similar to the Maharashtra cases, in that the amount of entertainment tax collected was to be retained by the new Multiplex Theatre Complexes for a period not exceeding four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case.
(See 2017-TIOL-459-SC-MISC)
