1. Whether the entertainment duty subsidy given to the assessee by the State Government for construction of multiplexes is in the nature of revenue receipts or capital receipt is the question raised in these appeals.

2. According to the Revenue, in the light of the judgment of the Apex Court in the case of Sahney Steel and Press Works Limited v. Commissioner of Income Tax reported in : (1997) 228 ITR 253 (SC), the entertainment duty subsidy received by the assessee must be held to be revenue receipt because, the subsidy is granted after the commencement of business and after the entertain duty is collected by the assessee.

3. The Apex Court in the case of Commissioner of Income Tax v. Ponni Sugars and Chemicals Limited reported in (2008) 306 ITR 392 (SC) [LQ/SC/2008/1888] has on consideration of its decision in the case of its decision in the case of Sahney Steel (supra) held thus:

.... The importance of the judgment of this court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account.....

Thus, the purposes for which the subsidy was given is relevant factor and if the object of subsidy was to enable the assessee to set up a new unit then the receipt of subsidy would be on capital account.

4. In the present case, as noted by the Income Tax Appellate Tribunal, the object of granting entertainment duty subsidy by the State Government was as follows:

1. As a result of the onslaught of Cable Television and advertisement in the field of Information Technology, the average occupancy in cinema theatre has fallen considerably and hardly any new theatres have been started in the recent past. Public at large these days prefer to see movies at home. Keeping in view this scenario, a concept of Complete Family Entertainment Centre, more popularly known as Multiplex Theatre Complex has emerged. These Multiplex Theatre Complexes offer various entertainment facilities for the entire family under single roof. However, these complexes are highly capital intensive, their gestation period is also quite longer, and therefore, need Government support and incentive in entertainment duty.

2. Government has, therefore, with a view to commemorate birth centenary of Chitrapati late Shri V. Shantaram, decided to grant concession in entertain duty to Multiplex Theatre Complexes to promote construction of new cinema houses in the State."

5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assessee is on capital account cannot be faulted. Accordingly, both the appeals are dismissed with no order as to costs.