DHANUKA LABORATORIES LIMITED,NEW DELHI V. ACIT CENTRAL CIRCLE-2, NEW DELHI

ITA 826/DEL/2023

AI Insights

Dhanuka Laboratories Ltd. appealed against the order of the Commissioner of Income Tax (Appeals) which upheld certain disallowances and additions made by the Assessing Officer. The main issues revolved around the disallowance under section 14A read with Rule 8D, the treatment of MEIS rewards as capital receipts, and the charging of excessive interest under sections 234B & 234C. The Tribunal found that the investments were made in entities controlled by the assessee and no expenditure was required to earn dividend income, thus allowing the appeal on these grounds. Additionally, it was held that the MEIS rewards are capital receipts and not taxable as income, aligning with the purpose of the scheme to enhance exports and not to provide assistance in running the business profitably.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23028 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: South Indian Bank Ltd. Vs. CIT, Assistant Commissioner of Income Tax Vs. Eastman Exports Global Clothing (P) Ltd., Goetze India Ltd. vs. CIT, Jute Corporation of India Limited v. Commissioner of Income Tax, National Thermal Power Company Limited v. Commissioner of Income-tax, Ponni Sugars & Chemicals Ltd. & ors. vs. Commissioner of Income-tax, Gravita Metal Inc vs. Commissioner of Income-tax, Commissioner of Custom vs. Dilip Kumar & Co., Commissioner of Income-tax vs. Jai Parabolic Springs Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: S.S. NAGAR
• Keywords: Set aside; Capital asset; Opportunity of being heard; Revised return; Question of law; Depreciation; Cost of acquisition; Capital receipt; Source of fund; Earning of tax free income; Rule 8D
• Section: 201; 13; 234B; 14A; 43B; 115JB; 20

Judgement Text

" 1 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 826/Del/2023 (A.Y. 2017-18) Dhanuka Laboratories Ltd. 82, 1st Floor, Abhinash Mansion, Joshi Road, Karol Bagh, New Delhi PAN: AAACD2877R Vs. ACIT Central Circle-2 Room No. 363, ARA Centre, E-2, Jhandewalan Extension, New Delhi Appellant Respondent Assessee by Shri S. S. Nagar, CA Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 13/01/2025 Date of Pronouncement 05/03/2025 ORDER PER YOGESH KUMAR, U.S. JM: This appeal is filed by the Assessee against the order of Commissioner of Income Tax (Appeal) (‘Ld. CIT (A)’ for short) - 23, New Delhi dated 02/03/2023 for the Assessment Year 2017-18. 2. The Grounds of Appeal are as under:- “1. That on the facts and in the circumstances of the case, the disallowance, imposition of tax and interest with reference thereto, the quantification of taxable income and the tax liability, has been grossly unjustified, erroneous and 2 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT unsustainable and necessary direction be given to the AO to give appropriate relief in accordance with law. 1.1. That on the facts and in the circumstances of the case, the Ld. CIT-(A) is unjustified in confirming the disallowance of Rs. 40,39,663/- u/s 14A of the Act r.w.r 8D of the IT rules without considering the factual scenario. 2.0 That on the facts and in the circumstances of the case, the CIT-(A) ought to have considered Rs.3,51,14,183/- reward under MEIS Scheme as capital receipt in the computation of total income under the normal provisions of the Act as well as in computing the book profit u/s 115JB of the Act. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT(A) is unjustified in confirming the excessive interest under section 234B & 234C of the Act charged by the Ld. AO. 4.0 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the grounds stated here-in- above, either before or at the time of hearing of this appeal.” 3. Brief facts of the case are that, the Assessee filed return of income of Rs. 11,92,17,950/-, later on revised the same on 30/03/2019 declaring the very same income. The case of the Assessee was selected for scrutiny under CASS as well as covered under the manual Selection also. The assessment order came to be passed on 15/12/2019 by making addition u/s 14A of the Income Tax Act, 1961 (‘Act’ for short), of Rs. 40,39,663/-, disallowed Rs. 11,70,671/- u/s 43B of the Act and also made addition on account of deduction claimedu/s 80GGB of the Act to the tune of Rs. 21,00,000/-. Aggrieved by the assessment order dated 15/12/2019, the Assessee preferred an Appeal before the CIT(A). 3 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT The Ld. CIT(A) vide order dated 02/03/2023, upheld the disallowances of Rs. 40,39,663/- made u/s 14A of the Act andRs. 11,70,671/- made u/s 43B of the Act, further also dismissed the additional ground related to receipt/reward receivedunder MEIS Scheme asexempt income. Aggrieved by the order of the Ld. CIT(A), the Assessee filed the present Appeal on the Grounds mentioned above. 4. Ground No. 1.0 and 1.1 are regarding the disallowance of Rs. 40,39,663/- made u/s 14A of the Act read with Rule 8D of the IT Rules. The Ld. Counsel for the Assessee submitted that the investments have been made in the entities controlled by the Assessee and no expenditure was required to be earned any dividend income as there are no regular investment/traded in stock exchange. The Ld. Counsel further submitted that interest free ownfunds are available and exceeding the investment. The Ld. Assessee's Representative by relying on plethora of Judgments sought for allowing the Ground No. 1.0 and 1.1. 5. Per contra, the Ld. Departmental Representative relying on the findings of the Lower Authorities, sought for dismissal of the Ground No. 1.0 and 1.1.of the Assessee. 4 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 6. Heard the parties and perused the material available on record. As per the chartsubmitted by the Assessee, the investment has been made in the entities controlled by the Assessee, therefore, the Ld. Assessee's Representative contended that no expenditure is required to earn any dividend income as the same are not regular investment/traded in stock exchange. Further, the interest free own funds are available which is exceeding the investment, the said fact could be corroborated from the audited financials producedat page No. 1 to 20 of the Paper Book. By following the ratio laid down in the case of South Indian Bank Ltd. Vs. CIT (130 Taxman.com 178), we delete the disallowance made by the A.O. u/s 14A read with Rule 8D (2) (ii) of the Act. Accordingly, the Ground No.01 and 1.1 of the Assessee are allowed. 7. In Ground No. 2 the Assessee contended that the Ld. CIT(A) ought to have considered Rs. 3,51,14,183/- which being aReward under MEIS Scheme as capital receipt in the computation of the total income under the normal provision of the Act as well as in computing the book profit u/s 115JB of the Act. The Ld. Counsel vehemently submitted that the export incentives under MEIS are incentives granted in the form of Reward as per FTP Policy 2015 to 2020. The said Reward is granted to eligible exports under the FTP Policy. The Ld. Counsel submitted that 5 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT there is a difference between the term ‘Assistance’ and ‘Reward’ and by referring to dictionary of law lexicon, submitted that the word ‘assistant’ has been defined as the “act of assisting; help; aid; succour; support, the action of assisting, the help afforded; aid; relief’.However, the term reward is usually applied to a sum paid for the performance of some specific act to some person or persons. A reward is a ‘recompense’ or a ‘premium’ offered by services to be performed.’ The Ld. Counsel further submitted that script is not an ‘Assistance’ which being a ‘Reward’ received by the Assessee for export under the scheme of Government of India for the efforts undertaken to enhance the exports. The Ld. Counsel further submitted that the objective of the Government being promotion of manufacturing and export of notified good and incentive in the form of Reward and considering the purpose test of the scheme, the aforesaid reward is not chargeable to tax being capital in nature under normal provisions of the Act.The Ld. Assessee's Representative relied on the order of Tribunalof Chennai Bench dated 20/09/2024 in the case of Assistant Commissioner of Income Tax Vs. Eastman Exports Global Clothing (P) Ltd. reported in (2024) 167 Taxmann.com 434 (Chennai Trib) and submitted that the issue in the present appeal is squarely covered, therefore, sought for allowing the Ground No. 2 of the Assessee. 6 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 8. The Ld. Departmental Representative submitted that initially the Assessee treated the amount received from the Governmentas an incentive under the MEIS as income and offered to tax and only during the course of appellate proceedings by way of additional ground of Appeal, the same has been claimed that the said amount is exempted from the tax. Further submitted that the as per the Judgment of Hon'ble Supreme Court in the case of Goetze India Ltd. vs. CIT reported in 284 ITR 323 (S.C.) , the Assessee’s additional Ground cannot be entertained. Further submitted that the export benefit arising to the Assessee by doing business activity which falls u/s 28(iiib) and (iv) of the Act and the same is included in the definition of word ‘Income’ under Section 2(24) of the Act, therefore submitted that the Ground No. 2 of the Assessee is devoid of merit, accordingly sought for dismissal of the Appeal. 9. We have heard both the parties and perused the material available on record. The Assessee received an amount of Rs. 3,51,14,183/-as incentive under Merchandise Exports from India Scheme (MEIS) of Government of India. The Ld. Assessee's Representative fairly submitted that due to certain mistakes the Ld. CIT(A) has mentioned that the Assessee has received an amount of Rs. 16,02,39,803/- instead of Rs. 3,51,14,183/- and submitted that the said fact can be corroborated 7 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT from the ledger copy produced by the Assessee at page No. 60 of Paper Book of the Assessee. 10. In the return of income, the Assessee treated the said amount of Rs. 3,51,14,183/-as ‘income’ and offer to tax. During the first appellate proceedings, the Assessee claimed that the said receipt are exempt from tax. The Ld. CIT(A) considering the fact that the said claim was not made in the return of income or the revised return of income, by relying on the Judgment of the Hon'ble Supreme Court in the case of Goetze India Ltd. (supra) the Ld. CIT(A) held that the claim of the Assessee is not admissible. 11. Now the question arose for consideration as to whether can Assessee make additional claim by way of additional ground which was not made in the return of income or not?. The Hon’ble Bombay High Court in the case of Commissioner of Income Tax, Central-1, Mumbai Vs. Pruthvi Brokers and Shareholders reported in [2012] 23 Taxman.com 23(Bom) vide Judgment dated 21/06/2012, after considering the plethora of Judgmentson the said issue including the Judgment of the in the case of Goetze India Ltd. (supra), held that the Assessee is entitled to raise additional Grounds before the appellate 8 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT authorities by making additional claims which were not made in the return filed by the Assessee. The relevant portions of the Judgment are as under:- “10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the ITXA3908 return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income Tax, 1991 Supp (2) SCC 744 = (1991) 187 ITR 688. The second submission is based on a judgment of the Supreme Court in Goetze (India) Limited v. Commissioner of Income Tax, (2006) 157 Taxman 1. 11(A). In Jute Corporation of India Limited v. CIT, for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction ITXA3908 in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under :- \"5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) \"If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income-tax ITXA3908 Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do.\" (emphasis supplied) 6. The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co- terminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate 9 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer.\" [emphasis supplied] (B) It is clear, therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such ITXA3908 additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. 12. At page 694, after referring to certain observations of the Supreme Court in Additional Commissioner of Income-tax v.Gurjargravures P. Ltd., (1978) 111 ITR 1, the Supreme Court observed at Page 694 as under :- \"The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant ITXA3908 Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose.\" [emphasis supplied] 13. The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The sentence read as a whole entitles an assessee to raise new grounds/make additional claims :- \"if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made....\" \"or\" 10 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT if \"the ground became available on account of change of circumstances or law\" The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which ITXA3908 were available when the return was filed. The first part viz. \"if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made...\" clearly relate to cases where the ground was available when the return was filed and the assessment order was made but \"could not have been raised\" at that stage. The words are \"could not have been raised\" and not \"were not in existence\". Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz. where \"the ground became available on account of change of circumstances or law.\" 14. The facts in Jute Corporation of India Ltd., various judgments referred to therein as well as in subsequent cases, which we will refer to, establishes this beyond doubt. In many of the cases, the grounds were, in fact, available when the return was filed and/or the assessment order was made. In Jute Corporation of India Ltd., the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as \"it entertained a belief that it was not liable to pay purchase tax under ITXA3908 the Bengal Raw Jute Taxation Act, 1941\". Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Manufacturing Company Limited v. Commissioner of Income-tax, (1971) 82 ITR 363. ig This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction. The words \"could not have been raised\" must, therefore, be construed liberally and not strictly. 15. It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. ITXA3908 However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made. 16(A). A Full Bench of this Court in Ahmedabad Electricity Limited v. Commissioner of Income-tax, (1993) 199 ITR 351 considered a similar situation. In that case, the appellant/assessee did not claim a deduction in respect of the amounts it was required to transfer to contingencies reserve and dividend and tariff reserve either before the Income Tax Officer or before the Appellate Assistant Commissioner in appeal. Subsequently, this Court had, in Amalgamated Electricity Company Limited v. Commissioner of Income-tax, (1974) 97 ITR 334, held that such amounts represented allowable deductions on revenue account. The appellant, therefore, raised 11 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT a new claim and additional grounds before the Tribunal in that ITXA3908 connection. The Tribunal rejected the same. The second question which was raised in the reference before the Division Bench was as under :- \"(2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in not allowing the assessee leave to raise in its own appeals additional grounds and in the departmental appeals cross objections regarding the deductibility of the sums transferred to contingency reserve and tariff and dividend control reserve?\" (B) The Division Bench which heard the reference, finding that there was a conflict of decisions, placed the papers before the Hon'ble Chief Justice for constituting a larger bench to resolve the controversy. The Full Bench answered the reference in the affirmative and in favour of the assessee. The Full Bench held :- \"Thus, the Appellate Assistant Commissioner has very wide powers while considering an appeal which may be filed by the assessee. He may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of an assessee in accordance with law. Hence an Appellate Assistant Commissioner also has the power to enhance the tax liability of the assessee although the Department does not have a right of appeal before the Appellate Assistant Commissioner. The Explanation to sub- section (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings ITXA3908 which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act.\" (C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income-tax (supra) set out above. It is important to note that even in this case, therefore, the ground existed when the return was filed. The mere fact that a decision of a court is rendered subsequently does not indicate that the ground did not exist when the law was enacted. Judgments are only a declaration of the law. The assessee could have raised the ground in its return itself. It did not have to await a decision of a court in that regard. Indeed, even if a judgment is against an assessee, it is always open to the assessee to claim the deduction and carry the matter higher. The words \"could not have been raised\", therefore, cannot be read strictly. Neither the Supreme Court nor the Full Bench of this Court meant them to be read strictly. They include cases where the assessee did not raise the claim for a reason found to be reasonable or valid by the ITXA3908 appellate authorities in the facts and circumstances of a case. 17. The next judgment to which our attention was invited by Mr. Mistri is the judgment of a Bench of three learned Judges of the Supreme Court in National Thermal Power Company Limited v. 12 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT Commissioner of Income-tax, (1997) 7 SCC 489 = (1998) 229 ITR 383. In that case, the assessee had deposited its funds not immediately required by it on short term deposits with banks. The interest received on such deposits was offered by the assessee itself for tax and the assessment was completed on that basis. Even before the Commissioner of Income-tax (Appeals), the inclusion of this amount was neither challenged by the assessee nor considered by the Commissioner of Income-tax (Appeals). The assessee filed an appeal before the Tribunal. The inclusion of the amount was not objected to even in the grounds of appeal as originally filed before the Tribunal. Subsequently, the assessee by a letter, raised additional grounds to the effect that the said sum could not be included in the total income. The assessee contended that on a erroneous admission, no income can be included in the total income. It was further contended ITXA3908 that the ITO and the Commissioner of Income-tax (Appeals) had erred and failed in their duty in adjudicating the matter correctly and by mechanically including the amount in the total income. It is pertinent to note that the assessee contended that it was entitled to the deduction in view of two orders of the Special Benches of the Tribunal and the assessee further stated that it had raised these additional grounds on learning about the legal position subsequently. The Tribunal declined to entertain these additional grounds. The Supreme Court did not answer the question on merits, but framed the following question and held as under :- \"4. The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on merit, we do not propose to answer the questions relating to the merit of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows: \"Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same.\" Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the ITXA3908 Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income Tax (Appeals). Both the assessee as well as the Department have a right to file an appea1/cross- objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.\" 13 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 18. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs.40,00,000/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/- paid after the end of the year in question. We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the ITXA3908 deduction in law is admitted and, in any event, clearly established. In the circumstances, the respondent ought not be prejudiced. 19. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal. 20. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs.40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent's tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs.40,00,000/- under section 43B of the ITXA3908 Act. 21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. 22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax, (2006) 157 Taxman 1. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought ITXA3908 to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee's appeal. The Tribunal, however, allowed the department's appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held :- 14 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT \"4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income- tax Act, 1961. There shall be no order as to costs.\" [emphasis supplied] ITXA3908 23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254. 24. A Division Bench of the Delhi High Court dealt with a similar submission in Commissioner of Income-tax v. Jai Parabolic Springs Limited, (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, ITXA3908 according to the Tribunal, arises in the matter and for the just decision of the case. 25. In the circumstances, it is not necessary to decide the other questions raised by Mr. Mistri.” 12. By following the ratio laid down in the case of Commissioner of Income Tax, Central-1, Mumbai Vs. Pruthvi Brokers and Shareholders (supra), we find no merit in the contention of the Ld. Departmental Representative that the Assessee cannot make additional claim which was not made in the revised return of income. 15 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 13. Now the issue to be decided on merit is that,whether the incentives granted in the form of Reward to the Assessee as per PTF Policy of 2015 to 2020 being an eligible export under PTP Policy is chargeable to the tax or not. The said issue has been decided by the Co-ordinate Bench of the Tribunal, Chennai Bench in the case of Assistant Commissioner of Income tax Vs. Eastman Exports Global Clothing Pvt. Ltd. (supra) wherein, the Co-ordinate Bench of the Tribunal considering the very sameargument of the Department, held that the benefit derived by way of sale MEIS scriptsin the open market in the name of ‘Award’ is not an ‘income’ within the meaning of provisionunder Section 2(24) (xviii) of the Actof the Act in following manners:- “27. Now, let us examine the Chapter 3 - with reference to 3.00 & 3.01(i) r.w. provisions under section 2(24) (xviii) of the Act. We already held that the objective of the scheme is to provide rewards to exporters falling under MEIS of Foreign Trade Policy - 2015 framed by the Government of India to exporters for level playing field. In view of the same, let us examine the arguments of the Id. DR as to whether the provisions under section 2(24)(xviii) of the Act are attracted to the facts of the present case or not, for better understanding, the provisions under section 2(24)(xvi) of the Act inserted by the Finance Act, 2015, w.e.f. 01.04.2016 is reproduced herein below for ready reference: (xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee [other than as substituted by the Finance Act, 2016, w.e.f. 01.04.2017 16 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or (b) the subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be.] 28. On plain reading of the above provisions, we note that the definition of income is provided under many sub-clauses to sub-section (24) of section 2 of the act,. The definition of income under sub-clause (xviii) includes assistance in the form of \"subsidy\" or \"grant\" or \"cash incentives\" or \"duty drawback\" or \"waiver\" or \"concession\" or \"reimbursement\" (by whatever name called) from Central Government or state Government or any authority or body or agency in cash or kind. In the present case, we find no \"subsidy\" or \"grant\" or \"cash incentives\" or \"duty drawback\" or \"waiver\" or \"concession\" or \"reimbursement\". The assessee got only reward for MEIS scheme under Foreign Trade Policy-2015 for a level playing field. 29. In this regard, the Id. AR placed on record meaning of terms in reference to section 2(24)(xviii) of the Act with examples. On perusal of the said meaning of terms, we note that the Government has launched the Fertilizer Subsidy Scheme, whereby, subsidy is paid on fertilizer sold for direct agriculture uses. The fertilizer subsidy division deals with payment of cost of imported urea of OMIFCO/canalizing agencies, recovery of pool issue price of urea from Handling Agencies, Ocean freight payments to vessel owners, subsidy disbursement in respect of imported urea, indigenous & imported P & K fertilizers, SSP including freight subsidy, reimbursement of freight, insurance charges, custom duty, handing charges, etc. With regard to the term \"grant\" in reference to section 2(24)(xviii) of the Act means, it is a sum of money given to a business or individual by the Government to support them in implementing or establishing the ideas or projects that ultimately contribute to societal development. The 17 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT grantee is expected to use the funds from the grant for the stud purposes. Cash incentive\" means any incentive received in cash and as its name indicates, a cash incentive has a clear monetary value being granted to motivate employees/company(s) to achieve the target company's overall revenue, etc. The term \"reimbursement\" means any expenditure which has been incurred by the assessee is being given back to the assessee. Since the expenditure would have been met in cash, the reimbursement of the same would also be in cash. As per Central Board of Indirect Taxes and Customs, \"duty drawback\" is a trusted and time-tested scheme administered by CBIC to promote exports. It rebates the incidence of Customs and Central Excise duties, chargeable on imported and excisable material respectively when used as inputs for goods to be exported. This WTO compliant scheme ensures that exports are zero-rated and do not carry the burden of the specific taxes. So duty drawback can either be in cash or in kind granted by the Board. \"Waiver\" or \"Concession\" falls under the category of discount on any amounts payable or paid. Therefore, we find the word and expressions by way of subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement made in sub-clause (xviii) of section 2(24) of the Act does not attract the facts of the present case. 30. We have to see as to whether the words by \"whatever name called\" will attract the \"assistance\" or the words subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement with reference to definition given above. In this regard, Shri Banusekar, Id. AR filed written note on principle of ejusdem generis and explained that where general words follow specific words then such general words take the colour from the specific words that precede and drew our attention the decisions of the Hon'ble Supreme Court in the case of Lokmat Newspaper Pvt. Ltd. v. Shankar Prasad AIR 1999 SC 2423, Municipal Corporation of Greater Bombay v. Bharat Petroleum Corporation Ltd. [2002] 4 SCC 219 and Grasim Industries Ltd. v. Collector of Customs 2002 taxmann.com 1803 (SC). The relevant part of 3 above said judgements are reproduced herein below: 18 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT In Lokmat Newspaper Pvt. Ltd. v. Shankar Prasad AIR 1999 SC 2423 the Hon'ble Supreme Court has stated that the rule of ejusdem generis provides that \"When particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified\". Further, the Hon'ble Supreme Court in the case of Municipal Corporation of Greater Bombay v. Bharat Petroleum Corporation Ltd. [2002] 4 SCC 219, has observed as under: \"............ The principle underlying ejusdem generis is applied when the statutory provisions concerned contain an enumeration of specific words, the subject of enumeration thereby constituting a class or category but which class or category is not exhausted at the same time by the enumeration and the general term follows the enumeration with no specific indication of any different legislative intention.\" The Hon'ble Supreme Court in the case of Grasim Industries Ltd. v. Collector of Customs 2002 taxmann.com 1803/2002 141 ELT 593 (SC). (SC), has held as under: \"In the background of what has been urged by the assessee it has to be further seen whether the principles of ejusdem generis have application. The rule is applicable when particular words pertaining to a class, category or genus are followed by general words. In such a case the general words are construed as limited to things of the same kind as those specified..........\" 31. On careful reading of the above judgements along with written note of the Id. AR, we note that the meaning of an unclear or ambiguous word or phrase can be determined by the words surrounding it and the words surrounding the words \"by whatever name called\" are the words subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement. Therefore, in our opinion, that the words \"by whatever name called\" only qualifies the words \"subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement\" and not the word 19 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT \"assistance\". As canvassed by the Id. AR, we note that the principle of ejusdem generis focuses on interpreting a general term in a list based on specific accompanying terms, taking support from the decision of Hon'ble Supreme Court in the case of Shankar Prasad (supra), Bharat Petroleum Corporation Ltd. (supra) and Grasim Industries Ltd. (supra), in our opinion, the words \"by whatever name called\" do not expand the scope of the word \"assistance\", but, only expands the scope of the words \"subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement\". We thus, hold that the word \"assistance\" is independent of the words \"by whatever name called\" and words \"by whatever name called\" are not qualifying the word \"assistance\". By applying the samefinding, let us see the difference between the words \"reward\" and \"assistance\". As per the note given by the ld. AR, the term \"reward\" is defined as a \"thing given in recognition of service, efforts or achievement\", whereas, the term \"assistance\" is defined as the provision of money, resources or information to help someone, thus, we find a \"reward\" is granted in a recognition of services, an assistance is given to someone as a help, but not in recognition of a service rendered. Therefore, in our opinion, there is a clear difference between the words \"reward\" and \"assistance\", thus, we hold the \"reward\" as in the Foreign Trade Policy 2015 and the \"assistance\" as found in the provisions under section 2(24)(xviii) of the Act are different from each other, the \"reward\" does not fall within the definition of sub-clause (xviii) of sub-section (24) of section 2 of the Act. 32. Further, we find benefit granted under the Foreign Trade Policy -2015 by way of MEIS scrips do not fall within the meaning of any of the terms cited from Government website and, therefore, does not fall within the meaning of \"subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement as provided under section 2(24)(xviii) of the Act. 33. The Id. DR preferred Income Computation and Disclosure Standard [\"ICDS\" in short hereinafter) and submits that the CBDT notified ICDS -1 to ICDS-X vide notification No. SO- 892(E) dated 31.03.2015 after wide public consultation. The ICDS-VII relating to Government grants provides that all 20 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT Government grants except relating to depreciable asset shall be recognized as income in accordance with the provisions of the said ICDS. We note that in order to avoid future litigation and controversy that definition of income under section 2(24) has been amended so as to provide that income shall include assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement by whatever name called by the Central Government. He argued that this ICDS is applicable for computation of income chargeable under the head \"Profits and gains of business or profession\" or \"income from other sources\". In case of any conflict between the provisions of the Income Tax Act and the ICDS, the provisions of the Act shall prevail to the extent. We find this ICDS deals with the treatment of Government grants. The Government grants are sometimes called by other names such as subsidies, cash incentives, duty drawbacks, waiver, concessions, reimbursements, etc. We find the treatment of Government grants at page 12 & 13 of the paper book, which is reproduced herein below for better understanding: Treatment of Government Grants 5. Where the Government grant relates to a depreciable fixed assets or assets of a person, the grant shall be deducted from the actual cost of the asset or assets concerned or from the written down value of block of assets to which concerned asset or assets belonged to. 6. Where the Government grant relates to a non- depreciable asset or assets of a person requiring fulfilment of certain obligations, the grant shall be recognised as income over the same period over which the cost of meeting such obligations is charged to income. 7. Where the Government grant is of such a nature that it cannot be directly relatable to the asset acquired, so much of the amount which hears to the total Government grant, the same proportion as such asset bears to all the assets in respect of or with reference to which the Government grant is so deducted from the actual cost of the asset or shall be reduced from the 21 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT written down value of block of assets to which the asset or assets belonged to. 8. The Government grant that is receivable as compensation for expenses or losses incurred in a previous financial year or for the purpose of giving immediate financial support to the person with no further related costs, shall be recognised as income of the period in which it is receivable. 9. The Government grants other than covered by paragraph 5, 6, 7 and 8 shall be recognised as income over the periods necessary to match them with the related costs which they are intended to compensate. 10. The Government grants in the form of non-monetary assets, given at a concessional rate, shall be accounted for on the basis of their acquisition cost. 34. On perusal of the above, we note that the ICDS-VII only refers to a Government grant as seen above. We find the duty credit scrips under MEIS not included within its ambit, therefore, since MEIS is a reward not governed by ICDS-VII. The point 9 above clearly states that the Government grant other than covered by paragraph 5, 6, 7 & 8 shall be recognized as income over the periods necessary to match them with related costs which they are to compensate. We find a grant is intended a sum of money given by the Government or to be paid for a particular purpose, since, we held that benefit by way of MEIS scrips is not an assistance by way of a grant, in our opinion, the MEIS does not fall under ICDS-VII, since MEIS is not a grant. In thisregard in support of our view, let us reproduce point No. 3.03 of Foreign Trade Policy - 2015 at page 3 of thepaper book: 3.03 Objective Objective of Merchandise Exports from India Scheme (MEIS) is to offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially 22 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT those having high export intensity, employment potential and thereby enhancing India's export competitiveness. 35. The above point 3.03 clearly shows the objective of Merchandise Exports from India Scheme (MEIS) is to offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India's export competitiveness. 36. In reply, the Id. CIT-DR Shri Palanikumar contended the benefit of MEIS under Foreign Trade Policy-2015 are received on a year to year basis, is a revenue receipt, but not a capital receipt. We note that merely because a receipt is received on a year to year basis, is a revenue receipt is not acceptable for the reason that this Tribunal for AYs 2011-12 to 2016-17 i.e., five assessment years held the receipt of sale of scrips under MLFPS based on Foreign Trade Policy-2015 is a capital receipt, we find no contrary view brought on record by the appellant-revenue, therefore, we find force in the arguments of the Id. AR that the reward under the Foreign Trade Policy- 2015 by way of MEIS scrips is given as a percentage of turnover cannot make the same as a revenue receipt, moreover, the manner of determining the benefit by itself cannot change the character of a capital receipt into a revenue receipt when the said benefit is not falling within the meaning under the provisions of section 2(24)(xviii) of the Act. In this regard, we refer to the decision of Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. & ors. (supra), which held that the purpose test is determination of whether a benefit under a Government policy is income or otherwise, the relevant portion of which is reproduced herein below for better understanding: 5. That matter concerns the 1980 Scheme. The dispute pertains to Assessment Year 1986-87. In this matter both the above questions arises for determination. The incentives conferred under that Scheme were twofold. First, in the nature of a higher free sale sugar quota and second, in allowing the manufacturer to collect excise duty on the sale price of the free sale sugar in excess of the 23 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT normal quota, but pay to the Government only the excise duty payable on the price of levy sugar. In that connection, we quote clause 7 of the Scheme, which reads as under: \"The beneficiaries of the incentive scheme shall ensure that the surplus funds generated through sale of the incentive sugar are utilized for the repayment of term loans, if any, outstanding from the Central Financial institutions. The sugar factories should submit utilization certificates annually from Chartered/Cost Accountant, holding certificate of practice. Utilisation certificate in respect of each sugar season during the incentive period should be furnished on or before the 31st December of the succeeding year. Failure to submit utilization certificate within the stipulated time may result not only in the termination of release of incentive free sale quota, but also in the recovery of the incentive free sale releases already made, by resorting to adjustment from the free sale releases of future years.\" 6. At this stage, we may again note that the 1980 and 1987 Schemes are similar to each other. In the case of Salem Cooperative Sugar Mills Ltd. we are concerned with the Scheme of 1980. 7. On the first question, namely, whether the incentive subsidy received by the assessee is a capital receipt, Shri P.V. Shetty, learned senior counsel appearing on behalf of the Department (appellant) submitted that the additional revenue generated by higher free sale sugar quota cannot be considered to be a capital receipt in the hands of the assessee (respondent herein) as held by the High Court. He further contended that similarly retention of the collective excise duty on the sale price of free sale sugar in excess of the normal quota and paying to the Government only the excise duty payable on the price of levy sugar resulted in revenue generation in the hands of the assessee which contention of the Department has been erroneously rejected by the High Court. According to the learned counsel, under the Scheme, there were two distinct concepts, namely, the concept of accrual of income in the hands of the assessee and the concept of application of additional funds generated thereunder. 24 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT According to the learned counsel, application of additional funds is neither material nor relevant for deciding the character of the incentive subsidy. In this connection, learned counsel placed reliance on the judgment of this Court in the case of Sahney Steel and Press Works Ltd. and olrs Vs. CIT reported in [1997] 94 Taxman 368/228 ITR 253 (S.C.) Shri Ganesh, learned senior counsel appearing on behalf of the assessee submitted that the benefits were conferred on the assessee under the 1980 and 1987 Schemes, namely, additional price by reason of enhancement of free sale sugar quota, which resulted in the benefit of additional price, which price had to be utilized only for repayment of loans taken by the assessee to establish a new unit or for expanding the existing unit. The said Schemes were not meant for a running unit. The second benefit, according to the learned counsel, lay in the rebate of excise duty under which the assessee was required to pay excise duty on the manufacture of additional quota of free sale sugar. According to the learned counsel, in judging the character of the incentive, the \"purpose test\" is applicable. In other words, according to the learned counsel, the character of the receipt in the hands of the assessee had to be determined with respect to the purpose for which the subsidy was given and that the point of time at which it is paid or its source or its form was irrelevant. In this connection, learned counsel also places reliance on the same judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). 9. The key question which arises for determination is: what is the character of the incentive subsidy under the said Schemes? 10. At the outset, it may be stated that during the relevant year in question, on account of economic factors, namely, high cost, the new sugar factories could not come up as it was not economically viable. Due to high cost, the financial institutions did not come forward to advance loans to the entrepreneurs of new sugar factories. Secondly, the tempo of establishing new sugar factories received a serious set back, therefore, the Government appointed a Committee known as Sampat Committee to examine the question 25 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT relating to economic viability of new sugar factories. One of the terms of reference suggested was to work out various incentives for making new sugar factories economically viable units. The increase of the cost of the project during the relevant years was on account of the increase in the cost of Plant and Machinery. The said Committee gave its Report in which the Committee recommended that the economic viability of a factory would mean that the unit should not break even after meeting the working expenses, interest on borrowings, depreciation on Plant and Machinery, but it should also be able to declare a reasonable dividend on the equity capital. According to the Committee, the factory should be able to generate sufficient funds to repay the instalments of the term loans. Under Para 21.0 the said Committee stated that five possible incentives for making a sugar plant economically viable unit could be provided for, namely, capital subsidy, allowing a larger percentage of free sale sugar, high levy sugar price, allowing rebate on excise duty and remission of purchase tax. In this case, we are concerned with allowability of a larger percentage of free sale sugar and rebate on excise duty. Following the said Report of the Sampat Committee, the above Schemes came to be formulated We have examined in this case the 1980 and 1987 Schemes. Essentially all the four schemes are similar except in the matter of details. Four factors exist in the said Schemes, which are as follows: (1) Benefit of the incentive subsidy was available only to new units and to substantially expanded units, not to supplement the trade receipts. (ii) The minimum investment specified was Rs. 4 crores for new units and Rs. 2 crores for expansion units. (iii) Increase in the free sale sugar quota depended upon increase in the production capacity. In other words, the extent of the increase of free sale sugar quota depended upon the increase in the production capacity. (iv) The benefit of the scheme had to be utilized only for repayment of term loans. 26 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 12. One important aspect may also be noted that in the case of Salem Cooperative Sugar Mills Ltd. we are concerned with Notification dated 15.11.1980. It indicates the above factors of the Scheme. The important point to be noted is that Government of India, financial institutions as well as the sugar industries are parties to the scheme in the sense that but for the scheme the financial institutions would not have given term loans to set up new units/expansion of the existing units. 13. The main controversy arises in these cases because of the reason that the incentives were given through the mechanism of price differential and the duty differential. According to the Department, priceand costs are essential items that are basic to the profit making process and that any price related mechanism would normally be presumed to be revenue in nature. In other words, according to the Department, since incentives were given through price and duty differentials, the character of the impugned incentive in this case was revenue and not capital in nature. On the other hand, according to the assessee, what was relevant to decide the character of the incentive is the purpose test and not the mechanism of payment. 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by 27 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is 28 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant.\" 37. On careful reading of the above, we note that the Hon'ble Supreme Court by referring to facts of the SahneySteel& Press WorksLtd. v. CIT [1997] 94 Taxman 368 (SC)/[1997] 228 ITR 253 (SC) observed if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account and the basic test to be applied in judging the character of a subsidy, that test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. Taking into account the same, held if the object of the assistance under the subsidy scheme was to enable the assessee to set up new unit or to expand the existing unit, then the receipt of the subsidy was on capital account. 38. By applying the same ratio as held by the Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. & ors. (supra) to the facts of the present case, we note that the reward by way of MEIS scrips is given to offset infrastructure inefficiencies, but, not for the purpose of running the business more profitably. It is noted further that though the said amounts are brought into profit and loss account claimed as exempt in the return of income, we find the said treatment in the books of accounts by itself cannot be determinative of taxability, we, therefore, hold that the same treatment of amounts received by way of sale of MEIS scrips as credited to the profit and loss account cannot alter the receipt, in our opinion, does not fall in the definition of income even after insertion of sub-clause (xviii) to section 2(24) of the Act. Thus, it is a capital receipt, notchargeable to tax. Therefore, the contention of the Id. DR relying upon the decision in the case of Sahney Steels & Works Ltd (supr) is not acceptable. 29 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT 39. In the case of Gravita Metal Inc (supra) for AY 2016-17 dated 15.06.2023, the Amritsar Bench of ITAT held as under: 16. The Ld. AR argued that 'exemption' and 'subsidy' are two separate and independent words and which are not defined. He contended that therefore, the general meaning of these words are required to be considered, as per Black's Law Dictionary (Sixth Edition) wherein these two words are defined as under:- Exemption: Freedom from a general duty or service; immunity from a general burden, tax, or charge. Immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes.' 'Subsidy: A grant of money made by government in aid of the promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public' 17. From the above definitions, it is apparently clear that word exemption is used in the conditions when assessee is given freedom from following any rules or regulations whereas subsidy is something which is given to the assessee to meet the cost of its project. In the present case, assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected. It is not subsidy given to meet cost of project. In our view, the exemption from excise duty do not fall in the definition of income as envisaged u/s 2(24)(xviii) of the Act. Meaning thereby, the amount of Rs.1,85,49,324/- is not an income but a capital receipt not taxable under the provisions of the Act. 18. The Hon'ble Supreme Court in \"Commissioner of Custom v. Dilip Kumar & Co.\", (supra) by considering the decision of judgment of State of West Bengal v. Kesoram Industries Ltd. 10 SCC 201 decided by the bench of 5 judges, has laid down the principles applicable for interpretation of taxing statute that in interpreting a 30 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and that If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly'. This principal of law is quoted referred by Hon'ble Supreme Court in case of \"Checkmate Services Pvt. Ltd. v. CIT\", [2022] 143 taxmann.com 178/290 Taxman 19/448 ITR 518 (SC)vide Para 50 of its judgement Respectfully, applying the above settled principal of law, to the interpretation of the Notification No.56/2002 dtd. 14.11.2002 as amended by Notification No.19/2008 dt. 27.03.2008, the assessee is granted exemption from payment of excise duty to the balance part of 36% of total excise duty collected. Since, the word 'exemption' in not included in the of ambit the Section 2(24)(xviii) of the Act, though it specifically includes the words subsidy, grant, cash incentive, duty drawback, waiver, concession & reimbursement. and hence, in the absence of inclusion of word 'exemption' under the said clause, we are of the considered view that the scope of this section cannot be enlarged to include exemption by interpreting that it is subsidy. Accordingly, the addition of Rs.1,85,49,324/-, confirmed by Ld. CIT(A) is held to be unjustified and bad in law. As such, the part addition confirmed by Ld. CIT(A) is directed to be deleted. Thus, the ground of the assessee is allowed. 40. On perusal of the above, we note that the Amritsar Bench of ITAT, by taking into account definition as per Black's Law Dictionary, held the words \"exemption\" and \"subsidy\" are two separate independent words in. Further, it held the word 31 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT \"exemption\" from excise duty do not fall in the definition of income as envisaged under section 2(24)(xviii) of the Act, thereby, held a sum claimed as exempt is not an income, but a capital receipt not taxable under the provisions of the Act. In order to come to such conclusion, the Amritsar Bench of ITAT placed reliance in the case of Commissioner of Customs (Import) v. Dilip Kumar & Company [2018] 95 taxmann.com 327 (SC)/AIR 2018 Supreme Court 3606, which laid down principle applicable for interpretation of taxing statute, that in interpreting taxing statute equitable consideration are entirely out of place, a taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted what is clearly expressed, it cannot employ anything which is not expressed, it cannot importprovision to statute so as to supply any do of the Act and in the absence of inclusion of it be shown that he provision, tothe ambit of section 2(24)(xii) of the include exemption by interpreting with words under the said falls within tope of section cannot be enlargede facts before ITAT Amritsar Benue with its subsidy. We find the facts of the present case are identical to the dion 2(24)(xvi) of these Benches. In the present case, the thefacreward\" is absent in the provisions of section 2(24) of the Act, in the absence of said word in section 2(24)(xvii) of the Act, the scope of the section cannot be enlarged to include \"reward\". 41. This Tribunal, in assessee's own case for AY 2011-12 & 2012-13 as per page 112-119 of the paper book, discussed the said issue in detail and the relevant part at para 9 is reproduced herein below for ready reference: \"9. We have considered the rival submissions on either side and also perused the relevant material available on record. The Market Linked Product Scheme is a scheme promoted by the Director General of Foreign Trade wherein incentive @ 2% on the FOB value of the total export was allowed. As per the Scheme, the incentive was given to export products in a specified market. The export of products which are covered under FPS list would be given incentive of 2% on FOB value of the export. In other words, it is an incentive given by the Government for exploring the new markets across the 32 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT globe. The question arises for consideration is when the assessee was given incentive for exploring the new markets across the globe, whether such incentive would be a capital receipt or revenue receipt? The Apex Court in the case of Ponni Sugars & Chemicals Ltd. (supra) had an occasion to examine an Identical situation and observed that if the object of the subsidy was to enable the assessee to carry on the business more profitably, then the receipt is on the revenue account. On the other hand, if the object of assistance was to enable the assessee to set up a new unit or expand the existing unit, then the receipt is on the capital account. In the case before us, the Government of India provided the incentive for exploring the new markets across the globe. Exploring a new market for a specified area would naturally expand the market area of the assessee. The incentive given to the assessee is not for running the business profitably but for expanding the market area. Therefore, this Tribunal is of the considered opinion that the incentive given by the Government to the assessee for exploring the new market is a capital receipt, hence it cannot be treated as income either under Section 2(24) or 28 of the Act. In view of the above, we are unable to uphold the order of the lower authority. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted.\" 42. On perusal of the above, we note that the question arose for consideration is when the assessee was given incentive for exploring the new markets across the globe, whether such incentive be revenue receipt. The Tribunal, considering decision of Hon'ble Supreme Court in the case a capital receipt or of PonniSugurs& Chemicals Ltd. (supra) held the incentive given by the Government of India for exploring new market across the globe, is not for running the business but for the expanding the market area, is a capital receipt and cannot be treated as income either under section 2(24) or 28 of the Act. As discussed above, the same finding has been followed by this Tribunal in assessee's own case for AY 2014-15 & 15-16, thereby, we summarise our finding in answering the grounds of appeal with reference to the arguments of the Id. DR and Id. AR, that 33 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT we hold that the decision of Hon'ble High Court of Bombay in the case of Serum Institute of India (P) Ltd. (sapra) is not applicable to the facts on hand as Hon'ble High Court was pleased to decide the question the constitutional validity of insertion of sub-clause (xviii) to sub-section (24) of section 2 of the Act only, but not its applicability. 43. We hold that as per the Foreign Trade Policy-2015, the benefit given by way of MEIS scrips are rewards, the meaning of which is completely different from the meaning of the term \"assistance\" under the provisions of section 2(24)(xviii) of the Act. We hold that the benefit by way of MEIS scrips could not fall within the meaning of the terms \"subsidy or grant or cash incentive or duty draw back or waiver or concession or reimbursement provided under section 2(24)(xviii) of the Act. We hold the ICDS-VII is not applicable as it deals with Government grants only, but not inclusive of the duty credit scrips under MEIS, which are rewards. We hold that the benefit under Foreign Trade Policy-2015 received being MEIS scrips cannot fall within the meaning of cash assistance under section 28(iiib) of the Act. We hold the sums received as a sale of MEIS scrips credited to the profit and loss account, the said treatment in the books of accounts by itself cannot be determinative of taxability of said receipt. Thus, the benefit derived by way of sale MEIS scrips in the open market is not an income with the meaning of provisions under section 2(24)(xviii) of the Act. Therefore, we find no infirmity in the order of the Id. CIT(A) for the reasons recorded therein and also for discussion made by us in the aforementioned paragraphs, the grounds raised by the Revenue fails and are dismissed.” 14. In the present case also the export incentives under MEIS are incentives granted in the form of Reward as per FPT Policy 2015 to 2020 to the eligible exports under FTP Policy, which being not an ‘assistance’ received by the Assessee for export under the scheme of Government, but the same is a ‘Reward’ for efforts undertaken to enhance the exports 34 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT and considering the purpose of the scheme and by relying on the order of the Co-ordinate Bench of the Tribunal at Chennai in the case of Eastman Exports Global Clothing Pvt. Ltd. (supra), we are of the opinion that the aforesaid ‘Reward’ is not chargeable to tax being capital in nature under the normal provisions of the Act. Accordingly, we allow Ground No. 2 of the Assessee and direct the A.O. to allow the claim of the Assessee in terms of the observation made hereinabove. 15. Further relying on the ratio laid down by the Hon'ble High Court of Calcutta in the case of Pr. Commissioner of Income Tax Vs. Ankit Metal and Power Limited, reported in [2019] 109 taxmann.com 93(Calcutta), wherein it is held that interest subsidy and Power subsidy being capital receipts could not form part of book profit under Section 115JB of the Act, we direct the A.O. to exclude the amount received by the Assessee under MEIS being capital receipt in computing book profit u/s 115JB of the Act. Accordingly, we allow the Ground No. 2 of the Assessee. 16. In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 05th March, 2025 Sd/- Sd/- (M. BALAGANESH) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 05 .03.2025 R.N, Sr.P.S* 35 ITA No. 826/Del/2023 Dhanuka Laboratories Ltd. Vs. ACIT Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "