In Brief
The State of Gujarat appealed against a High Court order regarding how tax exemption limits should be calculated for multiplex cinemas under a 1995 incentive scheme. The scheme provided tax holidays for multiplexes investing in capital infrastructure, with exemptions capped at 100% of capital investment. The State argued that notional tax should be added to actual collections; multiplexes argued only actual collections (notionally calculated at the applicable tax rate) should count. The Supreme Court upheld the High Court, holding that where an exemption scheme sets clear limits but lacks a calculation mechanism, the doctrine of substantial compliance requires applying a reasonable method based on actual collections and returns filed. The State's approach was illogical and unjustified; appeal dismissed.
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