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TMI Blog2025 (3) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision 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 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment 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 Judgments on 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 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner 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 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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" 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 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 lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner 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 :- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine 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 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawback 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 "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 same finding, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 written down value of block of assets to which the asset or assets belonged to. 8. The Government grant that is rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inct concepts, namely, the concept of accrual of income in the hands of the assessee and the concept of application of additional funds generated thereunder. 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. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing 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. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, 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 expansi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ably, 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 reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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