The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has directed Denovo adjudication as the intimation under Section 143(1) of the Income Tax Act 1961, neither contained any adjustment nor any demand nor reduction of refund regarding the exclusion of Merchandise Exports from India Scheme (MEIS) licence from the book profits under Section 115JB of the Income Tax Act.
The assessee, Aamor Inox Ltd was a limited company engaged in the business of manufacturing of steel. The return of income for the AY 2018-19 was filed on 26.10.2018 declaring loss under normal provisions of the Income Tax Act and book profit under Section 115JB of the Income Tax Act. Further a revised return of income was filed on 23.03.2019 declaring loss under normal provisions of the Income Tax Act and book profit under Section 115JB of the Income Tax Act and paid taxes thereon. The same was duly processed vide intimation under Section 143(1) of the Income Tax Act dated 13.04.2019 accepting the return.
During the year under consideration, the assessee received MEIS in the form of export incentives which was duly offered to tax in the return of income as revenue receipt. The assessee filed an appeal before the Commissioner of Income Tax Appeals (CIT(A)) to withdraw the aforesaid offer of revenue receipt to tax by claiming that the said receipt of export incentive would be capital receipt and hence not chargeable to tax.
Suresh K. Gupta, on behalf of the assessee submitted that the assessee was engaged in the business of manufacturing of steel bars of various kinds and shapes and substantial part of the manufactured products were exported to various countries. Accordingly, the assessee would be granted export incentives by the Government of Indiaw from time to time.
The key objective of the MEIS schemes introduced through the Foreign Trade Policy was to furnish the exporters with rewards in the form of duty credit scrips. These duty credit scrips were awarded under the above scheme to enable exporters to pay customs duty.
These rewards were given to exporters and the percentage of rewards were 2% to 5% depending on the items exported.These duty credit scrips/ licences were freely transferable and could also be used for payment of custom duty.
The assessee during the Asst Year under consideration had unsold MEIS scrips/licences in hand as on 01.04.2017. The assessee was awarded the MEIS licences for face value on the basis of exports done in Asst Year 2018-19 and the above receipt though offered to tax as revenue receipt in the return, would have to be construed as a capital receipt not chargeable to tax.
Amit Katoch, appeared on behalf of the revenue.
The two-member Bench of Balaganesh, (Accountant Member) and Anubhav Sharma, (Judicial Member) observed that the CIT(A) in his order had simply observed that in the intimation under Section 143(1) of the Income Tax Act had not made any adjustment under any head of income regarding the aforesaid issue and neither refund was reduced nor any demand was created.
The Bench allowed the appeal filed by the assessee holding that, “The CIT(A) further observed that once an amount was 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 CIT(A). The assessee is always at liberty to plead that a particular receipt has been erroneously offered to tax in the return.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
