In Brief
This case concerns whether subsidies granted through exemption of entertainment duty to newly constructed multiplex theatre complexes are capital or revenue receipts. Maharashtra and West Bengal granted concessions to incentivize construction of high-capital-intensive multiplex complexes. The income-tax authorities treated the exemptions as revenue receipts. The Supreme Court held that the character of a subsidy depends on its purpose, not when or how it is paid. Since the stated objective was to encourage construction of new multiplexes, the subsidy was capital in nature. The Court applied the "purpose test" and dismissed the revenue's appeals."
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