KALPANA PALACE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In IT Ref. No. 46 of 1995 the Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court :

(2.) In the IT Appeal No. 5 of 2001, the appellant had raised five questions of law which, according to it, are substantial questions of law. However, the decision on the question referred by the Tribunal under Section 256(1) of the Act would also decide the aforementioned IT Appeal. The reference and the appeal, as they raise a common question of law, have been heard together and are being decided by a common judgment.

(3.) For the sake of brevity, the facts of the IT Ref. No. 46 of 1995 are given below : The applicant is a registered partnership firm and is engaged in the business of cinema exhibition. During the relevant asst. yr. 1990-91 the cinema building was completed and business was started. For the asst. yr. 1990-91, it had filed the return on 29th Aug., 1990, showing a loss of Rs. 2,57,830 and subsequently it had filed a revised return under Section 139(6) of the IT Act showing a loss of Rs. 3,01,820. The ITO vide order dt. 5th March, 1991 completed the assessment at the income of Rs. 21,921. The ITO has disallowed the supervision charges for construction of cinema building, depreciation on cinema building @ 33.33 per cent and has also held that the grant-in-aid of Rs. 3,06,752, received by the assessee from State Government for the construction of permanent cinema building in backward area, is a revenue receipt and not a capital receipt as claimed by the assessee. Being aggrieved by the order dt. 5th March, 1991, it filed an appeal before the CIT(A)-I, Kanpur. The GIT(A), Kanpur, vide his order dt. 22nd Nov., 1991, allowed the appeal in part, granted the relief with regard to the supervision charges, depreciation on building and also held, that the grant-in-aid was a capital receipt and hence directed the AO to treat the grant-in-aid as capital receipt. Feeling aggrieved by the order passed by the GIT(A), Kanpur, the ITO filed an appeal before the Tribunal which has been partly allowed on 26th Nov., 1993. The Tribunal has held that the grant-in-aid received by the applicant is a revenue receipt. The IT Appeal relates to the subsequent asst. yr. 1991-92 and the amount of subsidy involved is Rs. 4,50,276.