Bharat Rasayan Limited, Delhi V. ACIT Circle-4(2), New Delhi

ITA 1231/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 6165 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 15-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: SANDEEP S NAGAR
• Keywords: Business expenditure; Opportunity of being heard; Question of law; Right to appeal; Capital receipt; Capital expenditure; Set aside
• Section: 115JB; 13; 22; 37; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1231/DEL/2019 : ASSTT. YEAR : 2014-15 BHARAT RASAYAN LTD., 1501, VIKRAM TOWER, RAJENDRA PLACE, NEW DELHI-110008 VS ACIT, CIRCLE-4(2), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACB4127A ASSESSEE BY : SH. SANDEEP S. NAGAR, CA REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEARING: 21.12.2020 DATE OF PRONOUNCEMENT: 02.02.2021 ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2, NEW DELHI, DATED 21. 12.2018. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) [HEREINAFTER REFERRED TO AS THE LD. CIT(APPEALS)] W AS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LEARNED AO OF WEIGHTED AVERAGE DEDUCTIO N U/S 35(2AB) OF THE ACT. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GR OSSLY ERRED IN NOT CONSIDERING THE FACT THAT THE RESEARCH AND DEVELOPMENT CENTER OF THE APPELLANT IS DULY RECOGNI ZED AND ALL THE DOCUMENTS NECESSARY FOR COMPLIANCE WITH THE ACT HAVE BEEN SUBMITTED WITH THE DSIR. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 2 2.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN ADM ITTING THE ADDITIONAL GROUND RAISED IN APPELLANT PROCEEDIN GS WITHOUT CONSIDERING THE JUDICIAL PRONOUNCEMENTS AND PROVISION OF THE ACT. 3.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) IS UNJUSTIFIED IN NOT AL LOWING THE CLAIM OF EDUCATION CESS OF RS.24,43,508/- AS AN ALLOWABLE BUSINESS EXPENDITURE. 4.0 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(APPEALS) IS UNJUSTIFIED IN NOT TR EATING FOCUS PRODUCT SCRIPT RS.14,81,465/- INCENTIVE RECEI VED UNDER FOREIGN TRADE POLICY AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX BY CONSIDERING THE PURPOSE TEST. DEDUCTION U/S 35(2AB): 3. STRAIGHT TO THE ISSUE, THE ASSESSEE CLAIMED WEIG HTED DEDUCTION U/S 35(2AB) AMOUNTING TO RS.1.21 CR. THE ASSESSING OFFI CER HELD THAT IN THE ABSENCE OF FORM 3CL, SUCH DEDUCTION IS NOT ALLOWABL E. 4. THE LD. CIT (A) SUPPORTED THE CONTENTION OF THE ASSESSING OFFICER REITERATING THAT IN THE ABSENCE OF FORM 3CL, THE CL AIM OF THE ASSESSEE CANNOT BE QUANTIFIED AND VERIFIED. WHILE DENYING TH E DEDUCTION, THE LD. CIT (A) HELD THAT SINCE SECTION 35(2AB) ALLOWS TWO TIME S DEDUCTION OF ACTUAL EXPENDITURE, IT IS NECESSARY TO HAVE THE QUANTIFICA TION AVAILABLE BEFORE THE AO AND VERIFY THE QUANTUM OF CLAIM. 5. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESSE E M/S BHARAT RASAYAN LTD. IS A RECOGNIZED IN HOUSE RESEAR CH & DEVELOPMENT (RD) CENTER APPROVED BY DEPARTMENT OF S CIENTIFIC RESEARCH GOVT. OF INDIA, NEW DELHI SINCE ASSESSMENT YEAR 2007- 08 AND THE RECOGNITION IS CONTINUING TILL DATE WITH OUT ANY INTERRUPTION AND REGULARLY SUBMITTING REQUISITE INF ORMATION TO DSIR IN FORM 3CK YEAR AFTER YEAR. HE HAS PRODUCED T HE COPY OF ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 3 THE RENEWALS ISSUED BY DSIR DATED 19.05.2015 GRANTI NG RENEWAL OF RECOGNITION UPTO 31.03.2021 WHICH ARE AS UNDER: DATED: 19 TH MAY, 2015 TO, M/S BHARAT RASAYAN LTD., 1501, VIKRAM TOWER, RAJENDRA PLACE, NEW DELHI-110008 SUBJECT: RENEWAL OF RECOGNITION OF IN-HOUSE R&D UNITS(S) DEAR SIRS, THIS HAS REFERENCE TO YOUR APPLICATION FOR RENEWAL OF RECOGNITION OF YOUR IN-HOUSE R&D UNIT(S) BEYOND 31.03.2015 BY THE DEPARTMENT OF SCIENTIFIC AND INDU STRIAL RESEARCH. 2. THIS IS TO INFORM YOU THAT IT HAS BEEN DECIDED T O ACCORD RENEWAL OF RECOGNITION TO THE IN-HOUSE R&D UNIT(S) OF YOUR FIRM AT 2 K.M. STONE MADINA MOKHRA ROAD, VILLAGE MO KHRA, TEHSIL MEHAM, DISTT. ROHTAK (HARYANA) UPTO 31.03.20 18. TERMS AND CONDITIONS PERTAINING TO THIS RECOGNITION ARE GIVEN OVERLEAF. 3. KINDLY ACKNOWLEDGE THE RECEIPT OF THIS LETTER. YOURS FAITHFULLY, SD/- (K.V.S.P. RAO) SCIENTIST G ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 4 DATED: 24 TH APRIL 2018 TO, M/S BHARAT RASAYAN LTD., 1501, VIKRAM TOWER, RAJENDRA PLACE, NEW DELHI-110008 SUBJECT: RENEWAL OF RECOGNITION OF IN-HOUSE R&D UNITS(S) DEAR SIRS, THIS HAS REFERENCE TO YOUR APPLICATION FOR RENEWAL OF RECOGNITION OF YOUR IN-HOUSE R&D UNIT(S) BEYOND 31.03.2018 BY THE DEPARTMENT OF SCIENTIFIC AND INDU STRIAL RESEARCH. 2. THIS IS TO INFORM YOU THAT IT HAS BEEN DECIDED T O ACCORD RENEWAL OF RECOGNITION TO THE IN-HOUSE R&D UNIT(S) OF YOUR FIRM AT C-1424, 2 ND FLOOR, M.I.E. PART B, BAHADURGARH, DISTT. JHAJJAR (HARYANA) UPTO 31.03.2021. TERMS AND CONDITIONS PERTAINING TO THIS RECOGNITION ARE GIVEN OVERLEAF. 3. KINDLY ACKNOWLEDGE THE RECEIPT OF THIS LETTER. YOURS FAITHFULLY, SD/- (DR. S. K. DESHPANDE) SCIENTIST G ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 5 6. THE EXPENDITURE INCURRED ON R&D CENTRE FOR THE ASSESSMENT YEAR 2014-15 IS AS UNDER: ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 6 7. FURTHER, THE ASSESSMENT YEAR 2016-17 THE EXPENDI TURE INCURRED ON R&D CENTRE IS AS UNDER: ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 7 8. IT WAS ARGUED THAT THE ABOVE EXPENDITURE FOR THE ASSESSMENT YEAR 2014-15 AND ASSESSMENT YEAR 2016-17 PROVES THAT THE ASSESSEE IS CONTINUOUSLY ENGAGED IN THE RE SEARCH ACTIVITY AND THE SAME HAS BEEN RENEWED AND APPROVED BY THE DSIR AS CAN BE SEEN FROM THE ABOVE APPROVAL LETTERS . IT WAS ARGUED THAT THE FORM 3CL COULD NOT BE SUBMITTED DUE TO THE FACT THAT THE CFO OF THE COMPANY HAS LEFT THE SERVI CE AND THE DOCUMENT COULD NOT BE TRACED. IT WAS ALSO SUBMITTED THAT FORM 3CL HAS BEEN SUBMITTED BY THE ASSESSEE ON 26.12.201 8 AND 95% OF THE EXPENDITURE WAS ALLOWED BY THE DGIT AS A LLOWED THE EXPENSES OF 95%. THE REPORT SUBMITTED BY THE PRESCR IBED AUTHORITY TO THE DGIT IS AS UNDER: ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 8 ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 9 9. THE STATEMENT OF EXPENDITURE CLAIMED AND ALLOWED BY THE DEPARTMENT IN THE FORM 3CL IS AS UNDER: ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 10 ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 11 10. THE LD. AR ARGUED THAT HAVING SUBMITTED ALL THE DETAILS, THE COMMUNICATION IN FORM 3CL WAS AS PER THE RULES IS BETWEEN THE PRESCRIBED AUTHORITY AND THE INCOME TAX DEPARTM ENT. 11. THE LD. AR SUBMITTED THAT IT IS THE RESPONSIBIL ITY OF THE ASSESSING OFFICER TO OBTAIN THE FORM 3CL FROM THE P RESCRIBED AUTHORITY AS THE ASSESSEE IS NOT PRIVY TO THE COMMU NICATION BETWEEN THE GOVERNMENT AUTHORITIES. HE ARGUED THAT ONCE THE EXPENDITURE HAS BEEN INCURRED ON R&D AND THE EXPEND ITURE PER SE IS NOT DOUBTED, THE REVENUE DEPARTMENT CANNOT DENY THE BENEFIT TO THE ASSESSEE. 12. ON THE OTHER HAND, THE LD. DR ARGUED THAT ANY E XPENDITURE WHICH IS TO BE ALLOWED AND GIVEN BENEFIT TO, THE AS SESSEE HAS ONEROUS RESPONSIBILITY TO PROVE THAT SUCH EXPENDITU RE IS ALLOWABLE. IT WAS ARGUED THAT THE ASSESSEE FAILED T O SUBMIT FORM 3CL WHICH IS A PREREQUISITE FOR CLAIMING OF DE DUCTION U/S 35(2AB). IT WAS ALSO ARGUED THAT ALLOWING OF SUCH E XPENDITURE IN THE EARLIER YEAR AND THE SUBSEQUENT YEAR DOESNT GIVE ANY RIGHT TO ALLOW THE DEDUCTION DURING THE CURRENT YEA R. 13. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 14. THE MOOT ISSUE TO BE DECIDED BY US IS WHETHER T HE CLAIM FOR DEDUCTION U/S 35(2AB) IN THE ABSENCE OF SUBMISS ION OF FORM 3CL BY THE ASSESSEE IS ALLOWABLE OR NOT. 15. WE ARE GUIDED BY THE OVERALL FACTS AND CIRCUMST ANCES OF THE ASSESSEE ON THIS ISSUE, WE FIND THAT THE ASSESS EE HAS SUBMITTED ALL THE DOCUMENTS NECESSARY TO PROVE THE CLAIM OF ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 12 DEDUCTION U/S 35(2AB). THE ASSESSEE HAS SUBMITTED F ORM 3CK FOR ENTERING INTO AN AGREEMENT WITH DSIR FOR R&D FA CILITY ALONG WITH AUDIT STATEMENT AND DSIR ISSUED LETTER STATING RECOGNITION OF IN-HOUSE R&D UNITS FROM 31.03.2012 TO 31.03.2015 AND THEREAFTER TILL 31.03.2018 AND UPTO 31.03.2021. FRO M THE PERUSAL OF SAID CERTIFICATES, IT CAN BE SEEN THAT T HE YEAR UNDER CONSIDERATION IS COVERED UNDER THE CERTIFICATES ISS UED BY THE DSIR WHEREIN APPROVAL HAS BEEN DULY GRANTED. WE HAV E ALSO GONE THROUGH THE PROVISIONS PERTAINING TO FORM 3CL AND FIND THAT THE FORM 3CL IS ISSUED BY THE SCIENTISTS FOR A ND ON BEHALF OF SECRETARY, DSIR AND THE REPORT IS TO BE SUBMITTE D TO THE DIRECTOR GENERAL (INCOME TAX EXEMPTION) U/S 35(2AB) OF THE INCOME TAX ACT, 1961. THE SAID FORMAT OF COMMUNICAT ION OF FORM 3CL IS AS UNDER: ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 13 ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 14 16. FROM THE ABOVE, WE FIND THAT IT IS THE RESPONSI BILITY OF THE AO TO OBTAIN THE COPY FROM THE DSIR. WE ALSO FIND T HAT THE DSIR HAS ALSO SUBMITS COPY TO THE JURISDICTIONAL CH IEF COMMISSIONER OF INCOME TAX TOO. THERE WAS NO DISPUT E REGARDING THE EXPENDITURE INCURRED BY THE ASSESSEE. 17. WITH REGARD TO THE ISSUE BEFORE HAND, WE HAVE A LSO GONE THROUGH THE JUDGMENT OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS SUN PHARMACEUTICAL INDUSTRIES LTD. W HERE IN IT WAS HELD THAT HAVING HEARD LEARNED COUNSEL FOR THE PARTIES AND HAVING PURSUED THE ORDERS ON RECORD, WE ARE BROADLY IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL. UNDISPUTED LY, THE RESEARCH AND DEVELOPMENT FACILITY SET UP BY THE ASS ESSEE WAS APPROVED BY THE PRESCRIBED AUTHORITY AND NECESSARY APPROVAL WAS GRANTED IN THE PRESCRIBED FORMAT. THE COMMUNICA TION IN FORM 3CL WAS THEREAFTER, BETWEEN THE PRESCRIBED AUT HORITY AND THE DEPARTMENT. IF THE SAME WAS NOT SO SURELY THE A SSESSEE CANNOT BE MADE TO SUFFER. TO THIS EXTENT THE TRIBUN AL WAS PERFECTLY CORRECT AND THE COMMISSIONER WAS NOT, IN OBSERVING ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 15 THAT IN ABSENCE OF SUCH CERTIFICATION, CLAIM OF DED UCTION UNDER SECTION 35(2AB) WAS NOT AVAILABLE. 18. SIMILARLY, THE TRIBUNAL IN THE CASE OF CENTURY SEEDS PVT. LTD. VS DCIT IN ITA NO. 942/HYD./2017 DATED 20.07.2 018 HELD THAT AO HAS CORRECTLY ALLOWED THE DEDUCTION AND THE RE IS NO ERROR IN THE ORDER PASSED BY AO U/S 143(3). ONCE A RESEARCH FACILITY IS APPROVED ENTIRE EXPENDITURE INCURRED ON DEPARTMENT OF R&D HAS TO BE ALLOWED WEIGHTED DEDUCTION AS PROV IDED U/S 35(2AB). 19. FURTHER, RELYING ON THE CASE OF DCIT VS FAMY CA RE LTD. ON THE SAME FACTS, THE TRIBUNAL IN THE CASE OF EFFTRON ICS SYSTEMS PVT. LTD. VS ACIT IN ITA NO. 216/VIZA/2015 LAID DOW N THE PROPOSITION THAT IN CASE FORM 3CL IS NOT AVAILABLE, THE APPELLANT SHOULD NOT BE PENALIZED AND WEIGHTED DEDUCTION CANN OT BE DENIED. 20. SIMILARLY, THE ITAT MUMBAI BENCH IN THE CASE MA HINDRA & MAHINDRA LTD. VS DCIT IN ITA NO. 8597/MUM/2010 ORDE R DATED 06.06.2012 WHEREIN IT WAS HELD THAT WHILE DECIDING THE ISSUE RELATED WITH BENEVOLENT PROVISIONS LIKE 35(2AB), LI BERAL AND PRACTICAL APPROACH SHOULD BE FOLLOWED. 21. HENCE, KEEPING IN VIEW THE ENTIRETY OF THE FACT S AND PECULIAR CIRCUMSTANCES OF THE INSTANT CASE, WE HOLD THAT THE ASSESSEE SHOULD NOT BE SHORNED OF THE LEGAL RIGHT B ESTOWED UPON BY THE PROVISIONS OF THE INCOME TAX ACT. THE R EVENUE MAY DISALLOW THE CLAIM OF THE ASSESEEE IF IT CAN PROVE THAT THE CLAIM OF THE ASSESSEE IS WRONG AFTER OBTAINING THE REPORT IN FORM 3CL ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 16 FROM THE CONCERNED AUTHORITY. THE MATTER IS BEING S ENT BACK TO THE FILE OF THE ASSESSING OFFICER. EDUCATION CESS: 22. THE ASSESSEE HAS TAKEN UP ADDITIONAL GROUNDS PE RTAINING TO DEDUCTION OF EDUCATION CESS BEFORE THE LD. CIT (A). THE LD. CIT (A) DID NOT ALLOW THE GROUNDS HOLDING THAT IT DOESN T EMANATE FROM THE ASSESSMENT ORDER. 23. BEFORE US, IT WAS ARGUED THAT A LEGAL GROUND CA N BE TAKEN UP ANY TIME BEFORE THE HIGHER AUTHORITIES. THE LD. AR RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT (1998) 229 ITR 383. ADMISSION OF THE ADDITIONAL GROUND HAS BEEN OPPOSED IN PRINCIPLE BY THE LD. DR. 24. KEEPING IN VIEW, THE JUDGMENT OF THE HONBLE AP EX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT (1998) 229 ITR 383 , THE ADDITIONAL GROUND FILED BY THE ASSESSEE IS ACCEPTED. THE RELEV ANT PORTION OF THE JUDGMENT IS AS UNDER: 5. UNDER SECTION 254 OF THE INCOME-TAX ACT, THE APPELL ATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREO N AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WI TH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PU RPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHOR ITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSE E IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT O F A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE T HE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TA XED OR A PERMISSIBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING T HAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITE M. WE DO NOT SEE ANY REASON TO RESTRICT THE POWER OF THE TRI BUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 17 FROM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A PPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS-OBJECTIONS BEFORE THE TRIBUNAL . WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSI DERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLIER. 6. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. C.I.T. . THIS COURT, WHILE DEALING WITH THE POWERS OF THE APPELLA TE ASSISTANT COMMISSIONER OBSERVED THAT AN APPELLATE A UTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE REST RICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PR OVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLA TE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHI CH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON 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 T HE INCOME-TAX OFFICER. THIS COURT FURTHER OBSERVED THA T THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CASE HAS TO BE CONSIDERED ON ITS OWN FACTS. THE APPELLATE ASSISTANT COMMISSIONER MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAISED EARLIER FOR GOOD RE ASONS. THE APPELLATE ASSISTANT COMMISSIONER SHOULD EXERCIS E HIS DISCRETION IN PERMITTING OR NOT PERMITTING THE ASSE SSEE TO RAISE AN ADDITIONAL GROUND IN ACCORDANCE WITH LAW A ND REASON. THE SAME OBSERVATIONS WOULD APPLY TO APPEAL S BEFORE THE TRIBUNAL ALSO. 7. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO I SSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER O F INCOME- TAX (APPEALS) TAKES TOO NARROW A VIEW OF THE POWERS OF THE APPELLATE TRIBUNAL [VIDE, E.G., C.I.T, V. ANAND PRA SAD (DELHI), C.I.T. V. KARAMCHANDPREMCHAND P. LTD. AND C.I.T. V. CELLULOSE PRODUCTS OF INDIA LTD. . UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NE W GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS WE FAIL TO SEE WHY SU CH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 18 NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO COR RECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 8. THE REFRAMED QUESTION, THEREFORE, IS ANSWERED IN THE AFFIRMATIVE, I.E., THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUN D BY THE AUTHORITIES BELOW AND HAVING A BEARING ON THE TAX L IABILITY OF THE ASSESSEE. WE REMAND THE PROCEEDINGS TO THE TRIB UNAL FOR CONSIDERATION OF THE NEW GROUNDS RAISED BY THE ASSE SSEE ON THE MERITS. 25. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT OF TH E HONBLE APEX COURT, THE ADDITIONAL GROUNDS TAKEN UP BY THE ASSES SEE ARE HEREBY ADMITTED. 26. READING THE PROVISIONS OF SECTION 40(A)(II), TH E ASSESSEE ARGUED THAT EDUCATION CESS PAID ON INCOME TAX DOESN T COME UNDER THE PURVIEW OF THE DEFINITION AS IT IS LEVIED ON THE AMOUNT OF INCOME TAX BUT NOT ON PROFITS OF BUSINESS. THE L D. AR RELIED ON THE CIRCULAR NO. 91/58/66-ITJ(19) BY CBDT DATED 18.05.1967, WHICH STATES THE EFFECT OF THE OMISSION OF THE WORDS CESS FROM SECTION 40(A)(II) IS THAT ONLY TA XES PAID ARE TO BE DISALLOWED IN THE ASSESSMENT FOR THE ASSESSMENT YEARS 1962- 63 ONWARDS. 27. THE LD. AR ALSO RELIED ON THE JUDGMENT OF HONB LE RAJASTHAN HIGH COURT IN THE CASE OF CHAMBAL FERTILI SERS AND CHEMICALS LTD. VS JCIT IN ITA NO. 52/2018 DATED 31. 07.2018 WHEREIN THE SAME ISSUE HAS BEEN DECIDED IN FAVOUR O F THE ASSESSEE AND PARTICULARLY HELD THAT EDUCATION CESS IS AN ALLOWABLE EXPENDITURE. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 19 28. FURTHER, HE ARGUED THAT IN THE CASE OF ITC VS A CIT IN ITA NO. 685/KOL/2014 DATED 27.11.2018 WHEREIN IT WAS HE LD THAT THE EDUCATION CESS IS AN ALLOWABLE EXPENDITURE. 29. THE LD. AR HAS ALSO RELIED IN THE CASE OF PEERL ESS GENERAL FINANCE & INVESTMENT CO. LTD. VS DCIT IN ITA NO.937 & 938/KOL/2018 DATED 24.03.2019 WHEREIN IT WAS HELD T HAT EDUCATION CESS IS NOT TAX AND IS AN ALLOWABLE EXPEN DITURE. 30. THE LD. DR ARGUED THAT IT IS NOT THE APPROPRIATE FORUM TO RAISE THE ISSUE AT THIS JUNCTURE. SINCE, THERE IS NO DISPUTE BETWEEN THE ASSESSEE AND THE ASSESSING AUTHORITIES, A NON-DISPUTE CANNOT BE ADJUDICATED. HE ARGUED THAT THE EDUCATION CESS IS A PART OF THE INCOME TAX AND IS A CHARGE ON THE ASSESSEE. HENCE, IT CANNOT BE TREATED AS EXPENSE EL IGIBLE FOR DEDUCTION. 31. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 32. REGARDING THE CLAIM OF EDUCATION CESS AS AN ALL OWABLE EXPENDITURE, WE FIND THAT THE CBDT VIDE CIRCULAR NO. 91/58/66 I TJ(19) CLARIFIED AS UNDER: INTERPRETATION OF PROVISIONS OF SECTION 40(A)(II) OF THE I.T ACT CLARIFICATION REGARDING. SECTION 40(A)(II) RECENTLY A CASE HAS COME TO THE NOTICE OF THE BOARD WHERE THE ITO HAS DISALLOWED THE CESS P AID BY THE ASSESSEE ON THE GROUND THAT THERE HAS BEEN NO MATER IAL CHANGE IN THE PROVISIONS OF SECTION 10(4) OF THE OL D ACT AND SECTION 40(A)(II) OF THE NEW ACT. 2. THE VIEW OF THE ITO IS NOT CORRECT. CLAUSE 40(A) (II) OF THE IT BILL, 1961 AS INTRODUCED IN THE PARLIAMENT STOOD AS UNDER: (A) ANY SUM PAID ON ACCOUNT OF ANY CESS, RATE OR T AX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSI ON OR ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 20 ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BA SIS OF, ANY SUCH PROFITS OR GAINS. WHEN THE MATTER CAME UP BEFORE THE SELECT COMMITTEE , IT WAS DECIDED TO OMIT THE WORD CESS FROM THE CLAUSE . THE EFFECT OF THE OMISSION OF THE WORD CESS IS THAT O NLY TAXES PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR THE YEA RS 1962-63 AND ONWARDS. 3. THE BOARD DESIRE THAT THE CHANGED POSITION MAY P LEASE BE BROUGHT TO THE NOTICE OF ALL THE ITOS SO THAT FURTH ER LITIGATION ON THIS ACCOUNT MAY BE AVOIDED. 33. THE SIMILAR ISSUE OF ALLOWABILITY OF CESS U/S 3 7 HAS BEEN EXAMINED BY THE CO-ORDINATE BENCH OF ITAT IN ITA NO. 685/CAL./2 014 WHEREIN THE AMOUNT OF THE CESS PAID HAS BEEN HELD TO BE AN ALLO WABLE DEDUCTION. 34. FURTHER, WE FIND THAT THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR IN ITA NO. 52/2018 IN THE CASE OF CHAMBAL FERTILIZERS AND CHEMICALS LTD. HELD THAT IN VIEW OF THE CIRCULA R OF CBDT WHERE THE WORD CESS IS DELETED, THE CLAIM OF THE ASSESSEE F OR DEDUCTION IS ACCEPTABLE. IN THAT CASE, THE HONBLE HIGH COURT HE LD THAT THERE IS DIFFERENCE BETWEEN THE CESS AND TAX AND CESS CANNOT BE EQUATED WITH THE CESS. 35. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC . 115 OF THE INCOME TAX ACT 1961 WHICH ARE AS UNDER: EXPLANATION 2 TO SECTION 115JB (2) OF THE ACT DEFI NES THE TERM 'INCOME-TAX' IN AN INCLUSIVE MANNER, WHICH INCLUDES CESS. PROVISION OF THE EXPLANATION 2 TO SECTION 115JB IS AS GIVEN BELOW:- FOR THE PURPOSES OF CLAUSE (A) OF EXPLANATION 1, TH E AMOUNT OF INCOME-TAX SHALL INCLUDE (I)ANY TAX ON DISTRIBUTED PROFITS UNDER SECTION 115- O OR ON DISTRIBUTED INCOME UNDER SECTION 115R ; ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 21 (II) ANY INTEREST CHARGED UNDER THIS ACT; (III) SURCHARGE, IF ANY, AS LEVIED BY THE CENTRAL A CTS FROM TIME TO TIME; (IV) EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIE D BY THE CENTRAL ACTS FROM TIME TO TIME; AND (V) SECONDARY AND HIGHER EDUCATION CESS ON INCOME-TAX, IF ANY, AS LEVIED BY THE CENTRAL ACTS FROM TIME TO TIME. 36. THUS, WHEREVER THE LEGISLATURE WANTED TO INCLUD E THIS TERM SPECIFICALLY IN THE STATUE IT HAS DONE SO UNDER THE ACT. THE TERM 'TAX' HAS BEEN DEFINED IN SECTION 2(43) OF THE ACT TO INCLUDE ONLY INCOME-TAX, SUPER TAX AND FRINGE BENEFIT TAX (FBT). PROVISION OF THE SECTION 2(43) IS AS GIVEN BELOW: 'TAX' IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT YEAR MEANS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR T O THE AFORESAID DATE AND IN RELATION TO THE ASSESSMEN T YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAYABLE UNDER SECTION 115WA . 37. SURCHARGE ON INCOME-TAX FINDS PLACE IN THE FIRS T SCHEDULE, BUT THAT IS NOT THE CASE SO FAR AS EDUCATION CESS I S CONCERNED. THEREFORE, THE EDUCATION CESS ON THIS REASONING CAN NOT BE EQUATED AS TAX OR SURCHARGE. BASED ON THIS, IT CAN BE SAID THAT SINCE THE WORD 'CESS' IS NOT SPECIFICALLY INCLUDED IN THE DEFINITION, IT CANNOT BE CONSIDERED A PART OF TAX, AND ACCORDINGLY, IT SHOULD NOT BE DISALLOWED IN U/S 40( A)(II) OF THE ACT. 38. FURTHER, WE ARE GUIDED BY THE JUDGMENT OF THE CONSTITUTIONAL BENCH WHICH WAS ALSO REFERRED IN THE CASE OF ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 22 DEWAN CHAND BUILDERS & CONTRACTORS VS UNION OF INDI A & OTHERS IN CIVIL APPEAL NO. 1830 OF 2008 DATED 18.11.2011. 39. THE CONSTITUTION BENCH OF THIS COURT IN HINGIR RAMPUR COAL CO. LTD. VS. STATE OF ORISSA2 WAS FACED WITH THE CH ALLENGE TO THE CONSTITUTIONAL VALIDITY OF THE ORISSA MINING AR EAS DEVELOPMENT FUND ACT, 1952, LEVYING CESS ON THE PET ITIONER'S COLLIERY. THE BENCH EXPLAINED DIFFERENT FEATURES OF A `TAX', A `FEE' AND `CESS' IN THE FOLLOWING PASSAGE: 'THE NEAT AND TERSE DEFINITION OF TAX WHICH HAS BEE N GIVEN BY LATHAM, C.J., IN MATTHEWS V. CHICORY MARKETING BOARD (1938) 60 C.L.R. 263 IS OFTEN CITED AS A CLASSIC ON THIS SUBJECT. 'A TAX', SAID LATHAM, C. J., 'IS A COMPULSORY EXACTION OF MONEY BY PUBLIC AUTHOR ITY FOR PUBLIC PURPOSES ENFORCEABLE BY LAW, AND IS NOT PAYMENT FOR SERVICES RENDERED'. IN BRINGING OUT THE ESSENTIAL FEATURES OF A TAX THIS DEFINITION ALSO AS SISTS IN DISTINGUISHING A TAX FROM A FEE. IT IS TRUE THAT BE TWEEN A TAX AND A FEE THERE IS NO GENERIC DIFFERENCE. BOT H ARE COMPULSORY EXACTIONS OF MONEY BY PUBLIC AUTHORITIES ; BUT WHEREAS A TAX IS IMPOSED FOR PUBLIC PURPOSES AN D IS NOT, AND NEED NOT, BE SUPPORTED BY ANY CONSIDERATION OF SERVICE RENDERED IN RETURN, A FEE 1 AIR 1954 SC 282 2 1961 (2) SCR 537 IS LEVIED ESSENTIALL Y FOR SERVICES RENDERED AND AS SUCH THERE IS AN ELEME NT OF QUID PRO QUO BETWEEN THE PERSON WHO PAYS THE FEE AND THE PUBLIC AUTHORITY WHICH IMPOSES IT. IF SPECI FIC SERVICES ARE RENDERED TO A SPECIFIC AREA OR TO A SP ECIFIC CLASS OF PERSONS OR TRADE OR BUSINESS IN ANY LOCAL AREA, AND AS A CONDITION PRECEDENT FOR THE SAID SERVICES OR IN RETURN FOR THEM CESS IS LEVIED AGAINST THE SAID ARE A OR THE SAID CLASS OF PERSONS OR TRADE OR BUSINESS THE CESS IS DISTINGUISHABLE FROM A TAX AND IS DESCRIBED AS A FEE. TAX RECOVERED BY PUBLIC AUTHORITY INVARIABLY GOES I NTO THE CONSOLIDATED FUND WHICH ULTIMATELY IS UTILISED FOR ALL PUBLIC PURPOSES, WHEREAS A CESS LEVIED BY WAY OF FE E IS NOT INTENDED TO BE, AND DOES NOT BECOME, A PART OF THE CONSOLIDATED FUND. IT IS EARMARKED AND SET APART FO R THE PURPOSE OF SERVICES FOR WHICH IT IS LEVIED.' ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 23 40. WE ALSO FIND THAT THE PROCEEDS FROM COLLECTION OF EDUCATION CESS ARE NOT CREDITED TO CONSOLIDATED F UND BUT TO A NON-LAPSABLE FUND FOR ELEMENTARY EDUCATION- PRARAMBHIK SHIKSHA KOSH . SINCE THE PROCEEDS FROM COLLECTION OF EDUCATION CESS ARE KEPT SEPARATE FOR A SPECIFIED PURPOSE, APP LYING THE PRINCIPLES IN THE AFORESAID DECISION OF APEX COURT IN THE CASE OF M/S DEWAN CHAND BUILDERS (SUPRA) , IT CAN BE SAID THAT THE SAME IS NOT IN THE NATURE OF TAX. HENCE, IT IS ALLO WABLE AS DEDUCTION. 41. FURTHER, PROVISIONS OF SECTION 37 ARE PERUSED W HICH ARE AS UNDER: 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. EXPLANATION 1.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTIO N (1), ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT, 2013 (18 OF 2013) SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 24 42. FROM THE ABOVE, WE FIND THAT EDUCATION CESS IS NOT OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36, EDUCATION CE SS IS NOT IN THE NATURE OF CAPITAL EXPENDITURE, EDUCATION CESS I S NOT PERSONAL EXPENSE OF THE ASSESSEE, IT IS MANDATORY F OR IT TO PAY EDUCATION CESS AND FOR THE PURPOSE OF COMPUTATION O F EDUCATION CESS, THE INCOME TAX IS TAKEN AS THE CRITERIA FOR COMPUTATIONAL PURPOSE. THUS, THE EXPENSE OF EDUCATION CESS IS MAN DATORY EXPENSES TO BE PAID BUT DOES NOT FALL UNDER CAPITAL EXPENSE AND PERSONAL EXPENDITURE AND HENCE MAY BE ALLOWED AS DE DUCTION. 43. WE HAVE ALSO GONE THROUGH THE VARIOUS JUDGMENTS OF JUDICIAL AUTHORITIES PAN INDIA WHEREIN THE FRESH CL AIM OF THE ASSESSEE IS CONSIDERED AND THE DEDUCTION U/S 37 OF EDUCATION CESS HAS BEEN ALLOWED. THE HONBLE HIGH COURT OF BO MBAY HELD THAT THE APPELLATE AUTHORITIES MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR REMAND THE CASE TO THE AO, BECAUSE THE BASIC PURPOSE OF A TAX APPEAL WAS TO ASCERTAIN THE CORRECT TAX LIABILITY IN ACCORDANCE WITH THE LAW. TO MENTI ON A FEW, DCIT VS M/S. AGRAWAL COAL CORPORATION PVT. LTD ITA NOS. 801 TO 803/INDORE/2018. ATLAS COPCO INDIA LTD. VS ACIT IN ITA NO. 736/PUNE/2011 TATA AUTOCOMP HENDRICKSON VS DCIT IN ITA NO. 2486/PUNE/2017 SYMANTEC SOFTWARE INDIA PVT. LTD. VS DCIT IN ITA NO . 1824/PUNE/2018 SICPA INDIA PVT. LTD. VS ACIT IN ITA NO. 704/KOL/20 15 PHILIPS INDIA LTD. VS ACIT IN ITA NO. 2612/KOL/2019 ITC LIMITED VS ACIT IN ITA NO. 685/KOL/2014 DCIT VS THE PEERLESS GENERAL FINANCE & INVESTMENT & CO. LTD. IN ITA NO. 1469/KOL/2019. ACIT VS ITC INFOTECH IN ITA NO. 220/KOL/2017 RECKITT BENCKISER INDIA PVT. LTD. VS DCIT (2020) 11 7 TAXMANN.COM 519 (KOL.) ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 25 CRYSTAL CROP. PROTECTION PVT. LTD. VS JCIT IN ITA N O. 1539/DEL/2016 MIDLAND CREDIT MANAGEMENT INDIA VS ACIT IN ITA NO. 3892/DEL/2017 VOLTAS LTD. VS ACIT IN ITA NO. 6612/MUM/2018 SESA GOA LTD. VS JCIT (2020) 117 TAXMANN.COM 96 (BOM.) CHAMBAL FERTILISERS AND CHEMICALS VS JCIT IN ITA NO . 52 OF 2018 (RAJ. HC) 44. HENCE, KEEPING IN VIEW THE PROVISIONS OF THE AC T PERTAINING TO SECTION 40(A)(II) AND SECTION 115JB, CIRCULAR OF TH E CBDT NO. 91/58/66- ITJ(19), THE ORDERS OF CO-ORDINATE BENCHES OF ITAT AND JUDIC IAL PRONOUNCEMENTS OF THE HONBLE HIGH COURT OF BOMBAY AND HONBLE HIGH COURT OF RAJASTHAN, WE HEREBY HOLD THAT THE ASSESSE E IS ELIGIBLE TO CLAIM THE DEDUCTION OF THE EDUCATION CESS AS PER THE PR OVISIONS OF SECTION 37 OF THE INCOME TAX ACT. INCENTIVE UNDER FOREIGN TRADE POLICY: 45. THE ASSESSEE HAS RECEIVED INCENTIVE UNDER FOCU S PRODUCT SCHEME (FPS) FROM GOVERNMENT OF INDIA FOR EXPORTS OF GOODS. IT WAS SUBMITTED THAT THE OBJECTIVE OF THE FPS IS T O PROMOTE EXPORT OF PRODUCTS WHICH HAVE HIGH INTENSITY/EMPLOY MENT POTENTIAL SO AS TO OFFSET INFRASTRUCTURAL INEFFICIE NCIES AND OTHER ASSOCIATED COST INVOLVED IN MARKETING OF THESE PROD UCTS. THAT SAID INCENTIVE WAS GIVEN @ 2% OF THE FOB VALUE FOR EXPORT TO POTENTIAL NEW MARKETS AND NOT FOR ALL THE MARKETS. THIS IS AN INCENTIVE GIVEN FOR EXPLORING NEW MARKET ON A LONG TERM PERSPECTIVE. THE POTENTIAL MARKETS WILL BE IDENTIFI ED BY THE GOVERNMENT AND THE SAMPLES WILL BE SENT FOR EXPLORI NG THE MARKETS. FROM THE PERUSAL OF THE SCHEME, IT CAN BE SEEN THAT, INCENTIVE HAS BEEN GIVEN WITH AN OBJECTIVE TO INTEN SIFY AND ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 26 ACCELERATE THE PROCESS OF DISPERSAL OF INDUSTRIES. THE LD. AR PRODUCED THE COPY OF THE SAID SCHEME TO BUTTRESS IS ARGUMENTS. 46. ON THE OTHER HAND, THE LD. DR ARGUED THAT THE I NCENTIVES ARE IN THE NATURE OF REVENUE AS IT IS LINKED TO THE PERCENTAGE OF THE FOB VALUE FOR EXPORTS. SINCE, THE FOB VALUE IS A TRADING IMPLICATION ANY INCOME ARISING OUT OF SUCH TRANSACT ION HAS TO BE TREATED AS REVENUE IN NATURE. 47. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 48. WE HAVE GONE THROUGH THE SCHEME OF THE LEGAL FR AMEWORK OF THE SCHEME OF FOREIGN TRADE POLICY AND CHAPTER-1 B PERTAINING TO SPECIAL FOCUS INITIATIVES WHICH READS AS UNDER: WITH A VIEW TO CONTINUOUSLY INCREASING OUR PERCENT AGE SHARE OF GLOBAL TRADE AND EXPANDING EMPLOYMENT OPPORTUNITIES, CERTAIN SPECIAL FOCUS INITIATIVES HA VE BEEN IDENTIFIED/CONTINUED FOR MARKET DIVERSIFICATIO N, TECHNOLOGICAL UPGRADATION, SUPPORT TO STATUS HOLDER S, AGRICULTURE HANDLOOMS, HANDICRAFT, GEMS & JEWELLERY , LEATHER, MARINE, ELECTRONICS AND IT HARDWARE MANUFACTURING INDUSTRIES, GREEN PRODUCTS, EXPORTS O F PRODUCTS FROM NORTH-EAST, SPORTS GOODS AND TOYS SECTORS. GOVERNMENT OF INDIA SHALL MAKE CONCERTED EFFORTS TO PROMOTE EXPORTS IN THESE SECTORS BY SPEC IFIC SECTORAL STRATEGIES THAT SHALL BE NOTIFIED FROM TIM E TO TIME. EXPORT OF PRODUCTS/SECTORS OF HIGH EXPORT INTENSITY/EMPLOYMENT POTENTIAL (WHICH ARE NOT COVER ED UNDER PRESENT FPS LIST) WOULD BE INCENTIVIZED AT 2% OF FOB VALUE OF EXPORTS (IN FREE FOREIGN EXCHANGE) UND ER FPS WHEN EXPORTED TO THE LINKED MARKETS (COUNTRIES) , WHICH ARE NOT COVERED IN THE PRESENT FMS LIST, AS NOTIFIED IN APPENDIX 37D OF HBPV, FOR EXPORTS MADE FROM 27.08.2009 ONWARDS. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 27 49. WE HAVE ALSO EXAMINED THE PARA NO. 3.15.3 OF TH E SCHEME DOCUMENT OF THE FOREIGN TRADE POLICY OF GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY WHEREIN IT WAS SP ECIFIED THAT MARKET LINKED FOCUS PRODUCTS SCRIPTS (MLFPS) IS MEA NT FOR EXPORT OF PRODUCTS OF HIGH EXPORT INTENSITY EMPLOYM ENT POTENTIAL WOULD BE INCENTIVIZED AT 2% OF FOB VALUE OF EXPORTS IN FREE FOREIGN EXCHANGE UNDER FPS WHEN EXPORTED TO TH E LINKED MARKET COUNTRIES. 50. THUS, THERE IS NO DISPUTE THAT THIS INCENTIVE I S AN EXPORT INCENTIVE. THE MATTER HAS BEEN WELL CONSIDERED BY T HE ORDER OF THE CO-ORDINATE OF ITAT CHENNAI IN THE CASE OF EAST MAN EXPORTS GLOBAL CLOTHING PVT. LTD. IN ITA NO. 47/MDS./2016 D ATED 17.05.2016. THE ORDER DEALT WITH THE SIMILAR ISSUE OF MARKET LINKED FOCUS PRODUCTS SCHEME SCRIPTS HAS BEEN DELIB ERATED AND THE SAME HAS BEEN TREATED AS A CAPITAL RECEIPT IN V IEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF P ONNI SUGARS AND CHEMICALS LTD. 306 ITR 392. THE RELEVANT PART O F THE ORDER IS AS UNDER: (FACTUAL MATRIX) 2. THE ASSESSEE SUBMITTED THAT THE ASSESSEE RECEIVED MARKET LINKED FOCUS PRODUCT SCHEME SCRIPS ON EXPORT OF KNITTED GARMENTS. THE MARKET LINKED FOCUS PRODUCT SCHEME WAS GIVEN @ 2% OF THE FOB VALUE FOR EXPORT TO POTENTIAL NEW MARKETS AND NOT F OR ALL THE MARKETS. ACCORDING TO THE LD. REPRESENTATIV E, THIS IS AN INCENTIVE GIVEN FOR EXPLORING NEW MARKET ON A LONG TERM PERSPECTIVE. THE POTENTIAL MARKETS WILL BE IDENTIFIED BY THE GOVERNMENT AND THE SAMPLE S WILL BE SENT FOR EXPLORING THE MARKETS. THE ASSESSE E IS ENGAGED IN THE MANUFACTURING OF HOSIERY GARMENTS , THEREFORE, EXPORTED HOSIERY GARMENTS TO SOUTH AMERICAN COUNTRIES. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 28 (OPERATIVE PART OF THE DECISION) 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MARKET LINKED FOCUS 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, I T IS AN INCENTIVE GIVEN BY THE GOVERNMENT FOR EXPLORING THE NEW MARKETS ACROSS THE 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 TH E REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT O F ASSISTANCE WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR EXPAND THE EXISTING UNIT, THEN THE RECE IPT IS ON THE CAPITAL ACCOUNT. IN THE CASE BEFORE US, T HE 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 RUNN ING THE BUSINESS PROFITABLY BUT FOR EXPANDING THE MARKE T 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 INCO ME EITHER U/S 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 LOW ER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. ITA NO. 1231/DEL/2019 BHARAT RASAYAN LTD. 29 51. WE HAVE GONE THROUGH THE ENTIRE FACTS AND PREPO SITION OF THE LAW AND FIND THAT THE ISSUE IS SQUARELY COVERED BY THE SAID ORDER OF THE TRIBUNAL WHICH WAS BASED ON THE JUDGME NT OF THE HONBLE APEX COURT. THE MLFPS RECEIVED BY THE ASSES SED IS TO BE TREATED AS CAPITAL RECEIPT ONLY. HENCE, WE HEREB Y ALLOW THE PLEA OF THE ASSESSEE ON THIS GROUND. 52. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/02/2021. SD/- SD/- (BHAVNESH SAINI) (DR. B. R. R. KUMA R) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 02/02/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR