2023 (10) TMI 391 - AT - Income Tax

Intimation passed u/s 143(1) - income from the scrips granted under MEIS of the Foreign Trade Policy 2015-20 - To be treated as capital receipts not chargeable to tax or revenue receipt - said receipt of MEIS licences was also sought to be excluded from the book profits computed u/s 115JB of the Act on the plea that it is capital receipt right from inception and hence cannot find its place in the profit and loss account - HELD THAT - CIT(A) in his order simply observed that the ld. CPC Benguluru in the intimation u/s 143(1) of the Act had not made any adjustment under any head of income regarding the aforesaid issue and neither refund is reduced nor any demand is created. CIT(A) further observed that once an amount is offered in the return of income by an assessee, the same cannot be sought to be reduced in the appellate proceedings. We are unable to comprehend ourselves to accept to this proposition of the ld. CIT(A). The assessee is always at liberty to plead that a particular receipt has been erroneously offered to tax in the return. It is trite law that there is no estoppel against the statute. Since no factual finding has been given by the ld. CIT(A) on the detailed concerns raised by the assessee , we deem it fit and appropriate, in the interest of justice and fairplay, to restore this appeal to the file of ld. CIT(A) for denovo adjudication in accordance with law. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

Summary

Issues involved:
The appeal concerns the treatment of income from export incentives received by the assessee under the MEIS scheme of the Foreign Trade Policy 2015-20. The primary issue is whether this income should be considered as capital receipts not chargeable to tax, as claimed by the assessee, or as revenue receipts subject to taxation.

Details of the Judgment:

Issue 1: Treatment of export incentives as capital receipts

The assessee, a limited company engaged in manufacturing steel, received export incentives under the MEIS scheme, which it initially offered as revenue receipt for taxation. However, the assessee contended that these incentives should be treated as capital receipts not chargeable to tax. The incentives were granted to exporters to promote exports of specified goods and increase foreign exchange inflow. The duty credit scrips awarded under the scheme were transferable and used for customs duty payment. The assessee had consistently received such awards and transferred them for consideration. The loss from the transfer was accounted for as part of export benefit. The assessee claimed a deduction for the loss while accounting for the export benefit. The appellate tribunal found merit in the assessee's argument and remanded the case to the CIT(A) for fresh adjudication, as no factual finding was given on the concerns raised by the assessee.

Issue 2: Exclusion of MEIS incentives from book profits u/s 115JB

The assessee also sought to exclude the MEIS incentives from the book profits computed under section 115JB of the Income Tax Act, contending that it was a capital receipt from inception and should not be included in the profit and loss account. The CIT(A) did not make any adjustment under this head in the intimation u/s 143(1) of the Act. The tribunal, however, held that the assessee could challenge the inclusion of a receipt in the return of income and directed a fresh adjudication by the CIT(A) on this issue.

In conclusion, the appeal was allowed for statistical purposes, and the case was remanded to the CIT(A) for denovo adjudication in accordance with law.

This summary provides a detailed overview of the judgment, highlighting the key issues involved and the tribunal's decision on each issue.