Judgment:
P. Venkatarama Reddi, J.
1. 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]177ITR540(AP) , ignoring the subsequently inserted provisions of rule 9A 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]177ITR540(AP) , ignoring the subsequently inserted provisions of rule 9A of the Income-tax Rules, 1962, applicable to the assessment year 1979-80 ?'
2. The Tribunal followed the decision of this court in CIT v. Chitra Kalpa : [1989]177ITR540(AP) and allowed the appeals of the assessees. It was decided in CIT v. Chitra Kalpa : [1989]177ITR540(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]152ITR39(AP) 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]152ITR39(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 9A of the Income-tax Rules was not considered by the Tribunal nor by the Division Bench in the aforementioned case.
3. It may be noticed that the proviso to rule 9A 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 9A 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 9A is at best a controversial point. The point having not been raised and decided by the Tribunal, we do not think it proper to direct reference of question No. 2 in these applications.
4. We, therefore, dismiss these income-tax cases. No costs.