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TMI Blog2021 (3) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... facility set up by the assessee was approved by the prescribed authority and necessary approval was granted in the prescribed format. The communication in form 3CL was thereafter, between the prescribed authority and the department. If the same was not so surely the assessee cannot be made to suffer. To this extent the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under Section 35(2AB) was not available. Tribunal in the case of Century Seeds Pvt. Ltd. Vs DCIT [ 2018 (8) TMI 663 - ITAT HYDERABAD ] held that AO has correctly allowed the deduction and there 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 provided u/s 35(2AB). Relying on the case of DCIT Vs Famy Care Ltd. [ 2014 (11) TMI 987 - ITAT MUMBAI ] on the same facts, the Tribunal in the case of Efftronics Systems Pvt. Ltd. [ 2016 (11) TMI 1251 - ITAT VISAKHAPATNAM ] laid down the proposition that in case Form 3CL is not available, the appellant should not be penalized and weighted deduction cannot be denied. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37. Incentive under Foreign Trade Policy - assessee has received incentive under Focus Product Scheme (FPS) from Government of India for exports of goods - HELD THAT:- There is no dispute that this incentive is an export incentive. The matter has been well considered by the order of the Co-ordinate of ITAT Chennai in the case of Eastman Exports Global Clothing Pvt. Ltd. [ 2016 (7) TMI 951 - ITAT CHENNAI ] The order dealt with the similar issue of market linked focus products scheme scripts has been deliberated and the same has been treated as a capital receipt in view of the decision of the Hon ble Apex Court in the case of Ponni Sugars and Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] Thus MLFPS received by the assessed is to be treated as capital receipt only . Appeal of the assessee is allowed. - Sh. Bhavnesh Saini, Judicial Member And Dr. B. R. R. Kumar, Accountant Member Assessee by: Sh. Sandeep S. Nagar, CA Revenue by: Sh. Prakash Dubey, Sr. DR ORDER Per Dr. B.R.R. Kumar, Accountant Member: The present appeal has been filed by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting requisite information to DSIR in form 3CK year after year. He has produced the copy of the renewals issued by DSIR dated 19.05.2015 granting renewal of recognition upto 31.03.2021 which are as under: Dated: 19th 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 Industrial Research. 2. This is to inform you that it has been decided to accord renewal of recognition to the In-House R D unit(s) of your firm at 2 K.M. Stone Madina Mokhra Road, Village Mokhra, Tehsil Meham, Distt. Rohtak (Haryana) upto 31.03.2018. 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 Dated: 24th 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the subsequent year doesn t give any right to allow the deduction during the current year. 13. Heard the arguments of both the parties and perused the material available on record. 14. The moot issue to be decided by us is whether the claim for deduction u/s 35(2AB) in the absence of submission of Form 3CL by the assessee is allowable or not. 15. We are guided by the overall facts and circumstances of the assessee on this issue, we find that the assessee has submitted all the documents necessary to prove the claim of deduction u/s 35(2AB). The assessee has submitted Form 3CK for entering into an agreement with DSIR for R D facility 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. From the perusal of said certificates, it can be seen that the year under consideration is covered under the certificates issued by the DSIR wherein approval has been duly granted. We have also gone through the provisions pertaining to Form 3CL and find that the Form 3CL is issued by the Scientists for and on behalf of Secretary, DSIR and the report is to be submitted to the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be shorned of the legal right bestowed upon by the provisions of the Income Tax Act. The revenue 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 from the concerned authority. The matter is being sent back to the file of the Assessing Officer. Education Cess: 22. The assessee has taken up additional grounds pertaining 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 can be taken up any time before the higher authorities. The ld. AR relied on the judgment of the Hon ble 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 Hon ble Apex 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 relevant portion of the judgment is as under: 5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (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 new 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 such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly 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 found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis 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 only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided. 33. The similar issue of allowability of cess u/s 37 has been examined by the Co-ordinate Bench of ITAT in ITA No. 685/Cal./2014 wherein the amount of the cess paid has been held to be an allowable deduction. 34. Further, we find that the Hon ble 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 Circular of CBDT where the word cess is deleted, the claim of the assessee for deduction is ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 challenge to the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, levying Cess on the petitioner'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 been 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 authority 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 assists in distinguishing a tax from a Fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money by public authorities; but whereas a tax is imposed for public purposes and 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 essentially for services rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure incurred by the assessee for the purposes of the business or profession. 42. From the above, we find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income Tax is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. 43. We have also gone through the various judgments of judicial authorities pan India wherein the fresh claim of the assessee is considered and the deduction u/s 37 of Education Cess has been allowed. The Hon ble High Court of Bombay 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 mention a few, DCIT Vs M/s. Agrawal Coal Corporation Pvt. Ltd ITA Nos. 801 to 803/Indore/2018. Atl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue is a trading implication any income arising out of such transaction has to be treated as revenue in nature. 47. Heard the arguments of both the parties and perused the material available on record. 48. We have gone through the scheme of the legal framework of the scheme of Foreign Trade Policy and Chapter-1B pertaining to special focus initiatives which reads as under: With a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Upgradation, Support to status holders, Agriculture Handlooms, Handicraft, Gems Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time. Export of Products/Sectors of high export intensity/employment potential (which are not covered under present FPS List) would be incentivized at 2% of FOB value of exports (in free foreign exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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