ITAT orders MLFPS received to be treated as Capital Receipts only [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi has ruled that Market Linked Focus Product Scrip (MLFPS) received is to be treated as a capital receipt only.

The assessee, Bharat Rasayan Ltd. claimed a weighted deduction under section 35(2AB) amounting to Rs.1.21 Cr. The Assessing Officer (AO) held that in the absence of Form 3CL, such deduction is not allowable. The Commissioner of Income Tax (Appeals)(CIT(A)) supported the contention of the AO reiterating that in the absence of Form 3CL, the claim of the assessee cannot be quantified and verified. While denying the deduction, the CIT (A) held that since Section 35(2AB) allows two times deduction of actual expenditure, it is necessary to have the quantification available before the AO and verify the quantum of the claim.

Judicial Member Bhavnesh Saini and Accountant Member Dr. B. R. R. Kumar relied upon the order passed in Supreme Court in the case of Ponni Sugars and Chemicals Ltd. (306 ITR 392.) and stated, “We have gone through the entire facts and preposition of the law and find that the issue is squarely covered by the said order of the Tribunal which was based on the judgment of the Hon’ble Apex Court. The MLFPS received by the assessee is to be treated as a capital receipt only. Hence, we hereby allow the plea of the assessee on this ground.”