COMMISSIONER OF INCOME-TAX VS A. NAGESHWARA RAO (HUF)
1999 P T D 2034
[226 I T R 818]
[Andhra Pradesh High Court (India)]
Before P. Venkatarama Reddi and P. Ramakrishnam Raju, JJ
COMMISSIONER OF INCOME-TAX
Versus
A. NAGESHWARA RAO (HUF) and another
Income-tax Cases Nos. 108 of 1991 and 56 of 1992, decided on 24/11/1995.
Income-tax---
----Reference---Capital or revenue receipt---Film production---Cash subsidy granted for film production by Government of A.P.---Tribunal following High Court judgment and holding subsidy was cash receipt---Effect of proviso to R. 9-A of Rules not considered---Proviso inserted after assessment years in question--=Question whether order of Tribunal justified in light of proviso to R. 9-A---Cannot be referred---Indian Income Tax Act, 1961, S.256(2)---Indian Income Tax Rules, 1962, R.9-A.
Where the Tribunal, following a decision of the High Court, held, in respect of assessment years 1979-80, 1982-83 and 1983-84, that cash subsidy granted to film producers was in the nature of inducement to produce films in the State of Andhra Pradesh, on an application to direct reference of the question whether the Tribunal was justified in ignoring the effect of the proviso to Rule 9-A of the Income-tax Rules, 1962:
Held, that the proviso to Rule 9-A of the Income-tax Rules, 1962, was inserted long after the relevant assessment years. In the questions formulated, reference was made to Rule 9-A only as it was in force during the relevant assessment year. The point whether the Revenue could draw support from Rule 9-A was not raised and decided by the Tribunal. Hence, no reference could be directed on the question whether the Tribunal was justified in deleting the cash subsidy received by the assessee from the income of the assessee.
CIT v. Chitra Kalpa (1989) 177 ITR 540 (AP) and CIT v. Sahney Steel and Press Works Ltd. (1985) 152 ITR 39 (AP) ref.
S.R. Ashok for Petitioner.
C. Kodandaram for Respondent.
JUDGMENT
P. VENKATARAMA REDDI, J.---The Commissioner of Income tax, Andhra Pradesh-I, Hyderabad, seeks reference of the following questions for the opinion of this Court in these two income-tax cases filed under section 256(2) of the Income Tax Act, 1961:
Income-tax Case No. 108 of 1991:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the cash subsidy granted by the Government of Andhra Pradesh to producers for production of films in Andhra Pradesh is not related to or meant as adjustment against or for defraying the cost of production of such films?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in deleting the cash subsidy received by the assessee from the income of the assessee applying the ratio of the decision of the Andhra Pradesh High Court in the case of CIT v. Chitra Kalpa (1989) 177 ITR 540, ignoring the subsequently inserted provisions of Rule 9-A of the Income-tax Rules, 1962, applicable to the case for the assessment years 1982-83 and 1983-84?"
Income-tax Case No.56 of 1992
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the cash subsidy granted by the Government of Andhra Pradesh to producers for production of films in - Andhra Pradesh is not related to or meant as an adjustment against or for defraying the cost of production of such films?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in deleting the amount of Rs.2 lakhs received by the assessee applying the ratio of the decision of the Andhra Pradesh High Court in the case of CIT v. Chitra Kalpa (1989) 177 ITR 540, ignoring the subsequently inserted provisions of Rule 9-A of the Income-tax Rules, 1962, applicable to the assessment year 1979-80?"
The Tribunal followed the decision of this Court in CIT v. Chitra Kalpa (1989) 177 ITR 540 and allowed the appeals of the assessees. It was decided in CIT v, Chitra Kalpa (1989) 177 ITR 540 (AP), that the subsidy given to the film producers under a Government order, similar to the one considered by the Division Bench in that case was in the nature of a capital asset and the subsidy was meant for defraying partly the cost of production of films produced in the State of Andhra Pradesh. An earlier decision of this Court in CIT v. Sahney Steel and Press Works Ltd. (1985) 152 ITR 39 was distinguished on the ground that the subsidy in that case related to the amount paid after the plant had started production. But if the State gives a subsidy to set up a new plant, it was held to be not a trading receipt. It was observed that the subsidy granted was in the nature of inducement to producers to produce feature films in the State of Andhra Pradesh and the subsidy of this nature cannot be compared to the subsidy granted to the assessee in CIT v. Sahney Steel and Press Works Ltd. (1985) 152 ITR 39 (AP). It is not in dispute that this decision is directly in point against the Revenue but learned standing counsel for the Income-tax Department-- Mr. D. Srinivas--submits that the effect of Rule 9-A of the Income-tax Rules was not considered by the Tribunal nor by the Division Bench in the aforementioned case.
It may be noticed that the proviso to Rule 9-A can perhaps be pressed into service by the Revenue to negative the claim similar to the one put forth by the respondents herein, but that proviso was inserted long after the relevant assessment years. In the questions formulated in these applications, a reference is made to Rule 9-A only as it was in force during the relevant assessment year. But, bereft of the proviso, how far and to what extent the Revenue can draw support from Rule 9-A is at best a controversial point. The point having not been raised and decided by the Tribunal, we do hot think it proper to direct reference of question No.2 in these applications.
We, there fore, dismiss these income-tax cases. No costs
M.B.A./1947/FC Applications dismissed