TaxTMI 
TaxTMI 
2022 (7) TMI 1134
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.... of the appellant. " The brief facts giving rise to the above additional ground of appeal is as under: In order to promote the exports, development of certain industries, employment generation, etc., the Government under the Foreign Trade Policy, provides subsidies and incentives to industries on the basis of different parameters set out in the respective schemes declared. The purpose of subsidy/ incentive schemes varies from development of backward areas to development of a lagging industry or to provide support to existing industries in difficult times of their operations, Whenever a scheme is declared, the purpose of the subsidy/incentive is set out in clear terms in rhc scheme itself. The Government of India in its Foreign Trade Policy 2004 started Special Focus Initiatives with an object to continuously increase out percentage share of global trade and expanding employment opportunities especially in rural and semi-urban areas. Under the mother policy of Special Focus Initiative certain special focus initiatives for market diversification, technological up gradations, support to status holders were Identified for which specific schemes like Focus Market Scheme (FMS), Foc....
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....ss more profitably, then, the receipt is on revenue account. If the object of the assistance was to enable the assesses to set up a new unit or to .expand the existing units, then the receipt was on the capital account. In the present case, the incentive in the form of Focus License was granted primarily for the "purpose' of to promoting export of products which have high export intensity/ employment potential, so as to offset infrastructural inefficiencies and other associated costs involved in marketing of these products and hence constituted capital receipt not liable to tax under normal provisions of the Act. In the following decisions, the Tribunal has been pleased to hold incentive received under FPS to be in the nature of a capital receipt not liable to tax: * PCT vs. Nitin Spinners Ltd: 1TA 31/2019 (Raj.) * CIT vs. Sham Lai Bansal: 200 Taxman 14 (P&H) * Suvidha Spiners Pvt Ltd vs. DCIT: 1TA Nos.65 and 66/Jodh/2018 (Jodhpur Trib.) * Eastman Exports Global Clothing Pvt Ltd vs. JCIT: 2016-ITL4113 (Chennai Trib.) The additional ground of appeal is being raised on the applicant being recently advised of the correct legal position and the omission to raise the afore....
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.... as the Department have a right to file an appeal/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. 6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate 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 with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Co....
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....IC of the Act. 2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in denying deduction under section 80-IC of the Act on the amount of duty drawback of Rs. 1,52,07,079 holding that the same is not derived from the industrial undertaking. 3. That the CIT(A) erred on facts and in law in not admitting and disregarding the additional evidence placed on record substantiating the contentions raised by the appellant. 4. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in denying deduction under section 80-IC of the Act on interest on KDR amounting to Rs.6,58,683. 5. That the CIT(A) erred on facts and in law in erred on facts and in law in confirming imposition of interest under sections 234B and 234C of the Act." 6. The appellant is a partnership firm engaged in the business of manufacturing and export of home furnishings item like, quilts, bedspread, cushion cover, etc. In the return, the appellant claimed deduction under section 80-IC of the Income-tax Act, 1961 ('the Act') in respect of profits derived from its manufacturing units in the State of Uttarakhand. Focus Products Scheme: 7. Duri....
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....der the Special Focus Initiatives, Focus Product Scheme (FPS) was introduced with an objective to incentivize export of such products which have high employment intensity in rural and semi-urban areas, so as to offset the inherent infrastructure inefficiencies and other associated costs involved in marketing of these products. The scheme was launched in 2006 and subsequently, several amendments were made to the scheme by adding more products eligible for export incentives under the scheme and giving different rate of duty credit scrip concessions. 13. Focus Product Scheme (FPS) was first introduced with the objective to incentivize export of such products which have high export intensity/ employment potential, so as to offset infrastructure inefficiencies and other associated costs involved in marketing of these products. The scheme was launched in 2006 and subsequently, several amendments were made to the scheme by adding more products eligible for export incentives under the scheme and giving different rate of duty credit scrip concessions. 14. The amount of incentive received under Technology Upgradation Fund Scheme (TUFS) was considered as a Revenue subsidy in the following c....
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....e of Liberty India (supra). In para 17 of the judgment, their Lordships recognized that section 75 of the Customs Act, 1962 and section 37 of the Central Excise Act, 1944, empower Government of India to provide for repayment of customs and excise duty paid by an assessee. The Court also recognized that duty drawback is fundamentally in the nature of refund of average amount of duty paid on materials of any particular class or description of goods used in the manufacture of export goods of specified class, though such refund is not arithmetically equal to customs duty or central excise duty actually paid by an individual importer-cummanufacturer. Therefore, the Court concluded, "profits derived by wav of such incentives do not fall within the expression "profits derived from industrial undertaking" in Section 80-IB." (Refer para 17 of the Judgment). To reiterate, it is emphasized that though receipt on account of duty drawback is in principle, not eligible for deduction under section 80-IB of the Act but only profits, if any derived by way of such incentive is required to be excluded for computing eligible profits and not the gross amount of incentives. The aforesaid contention ....
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....CIT Vs. Meghalaya Steel Ltd. which dealt with transport subsidy, interest subsidy, power subsidy, insurance subsidy and treating them as profits derived from business. The difference between "profit attributable to" and "profits derived from" a business are examined in detail. It said , 21. A series of decisions have made a distinction between "profit attributable to" and "profit derived from" a business. 22. In Cambay Electric Supply Industrial Co. Ltd. v CIT [1978] 113 ITR 84 (SC), the Court held that since an expression of wider import had been used, namely "attributable to" instead of "derived from", the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. In short, a step removed from the business of the industrial undertaking would also be subsumed within the meaning of the expression "attributable to". 23. The judgment in CIT vs. Sterling Foods, 104 Taxman 204 (SC) laid down a very important test in order to determine whether profits and gains are derived from business of an industrial undertaking. There should be a direct nexus between such profits and gains and the industrial und....
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....dustrial undertaking. In the instant case the nexus is not direct but only incidental. The industrial undertaking exports processed sea food. By reason of such export, the Export Promotion Scheme applies. Thereunder, the assessee is entitled to import entitlements, which it can sell. The sale consideration therefrom cannot, in our view, be held to constitute a profit and gain derived from the assessees' industrial undertaking." (Para 13) 26. In Pandian Chemicals Ltd. vs. CIT [2003] 262 ITR 278/129 Taxman 539 (SC), the Hon'ble Court dealt with the claim for a deduction under Section 80HH of the Act. The question before the Court was as to whether interest earned on a deposit made with the Electricity Board for the supply of electricity to the appellant's industrial undertaking should be treated as income derived from the industrial undertaking under Section 80HH. It was held that although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with the Electricity Board could not be said to flow directly fro....
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....xus cannot be only incidental. In the instant case by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Hence, the same could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was post-manufacture namely, export. 29. The judgment of Hon'ble Supreme Court in the case of Liberty India v. Commissioner of Income Tax, reported in (2009) 317 ITR 218 (SC) wherein it was held that subsidy by way of customs duty draw back could not be treated as a profit derived from the industrial undertaking is very specific to the issue of duty draw back. The judgment of the Apex Court in the case of Liberty India (supra) was in relation to the subsidy arising out of customs draw back and duty Entitlement Pass-book Scheme (DEPB) similar to the facts of the instant case. Hence, keeping in view the judgment of the Hon'ble Apex Court, we hereby affirm the order of the ld. CIT(A). Interest on KDR: 30. Heard the ar....