AI Structured Summary
Not yet generated for this judgment
Judgment
Per Renu Jauhri, Accountant Member:
The above captioned appeal is preferred by the assessee against the order dated 30.08.2025, passed by Addl./JCIT(A), Bhopal u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for A.Y. 2013-14.
The assessees has raised following grounds of appeal:
"1 That the Ld. CIT(A) has erred, both on facts and in law, in upholding the order of the Ld. AO with respect to the disallowance, Imposition of tax and interest with reference thereto, the quantification of taxable income and tax liability, which are unjustified, erroneous, and unsustainable.
2.That the Ld. CIT(A) has erred both on facts and in law in upholding the order of the Ld. AO with respect to disallowing the Appellants claim for refund towards under the Focus Product Scheme / Focus Market Scheme as capital receipt, in computation of total income under the normal provisions as well as while computing book profit under Section 115JB of the Act.
3.That in view of the judgment of Hon'ble Bombay High Court in the case of Pruthvi Brokers & Shareholders Private Limited (2012) 253 CTR 0151 and other judicial pronouncements, the appellant is entitled to raise the above grounds of appeal before CIT(A), since CIT(A) has jurisdiction to consider new &/OR additional claims /deductions subsequently which through inadvertence error not claimed in return of income OR before Ld. AO.
4.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."
Brief facts are that the assessee company filed its return for A.Y. 2013-14 on 27.09.2013 declaring loss of Rs.2,43,85,120/- and short term capital gains of Rs.47,531/- under normal provisions and book profit of Rs.14,11,08,823/- u/s 115JB of the Act. The assessee is a private limited company engaged in the business of agro chemicals and manufacturing of technical grade pesticides. The case was selected for scrutiny. During assessment proceedings, the assessee filed additional claim for treating the export incentive under focus products scheme as capital receipt vide letter dated 15.12.2016 enclosing herewith a copy of Focus Market Scheme. Ld. AO rejected the claim in the light of the Hon'ble Apex Court's judgment in the case of Goetze India Ltd. Vs. CIT 284 ITR 323 (SC) as the claim was neither made in the original return nor any revised return was filed. Assessment was completed at returned income u/s 143(3) dated 23.12.2016.
Aggrieved with the order, the assessee preferred an appeal before ld. CIT(A). However, the appeal was dismissed by ld. CIT(A) vide order dated 30.08.2025. Further aggrieved, the assessee has preferred an appeal before the Tribunal.
Before us Id. AR, submitted that Id. CIT(A) has erred in not considering the assessee’s ground of appeal by erroneously relying on Goetze India Ltd. (supra). He placed reliance on the decision of Hon’ble Apex Court in Jute Corporation of India Vs. CIT (1991) 187 ITR 688 in support of his claim that the issue should have been considered by Id. CIT(A) by way of addition ground. He further relied on the decision of the Hon’ble Supreme Court in the case of NTPC Vs. CIT (1998) 229 ITR 383 to argue that when the facts are on record, the issue raised before appellate authority should be considered in order to correctly assess the tax liability of the assessee.
As regards the merits of the claim, he has submitted that the assessee had availed export benefit of Rs. 31,68,529/- under the Focus Product Scheme (FPS) and the same was included in total income. However, in the light of Hon’ble Rajasthan High Court’s decision PCIT Vs. Nitin Spinners Ltd. 116 taxmann.com 26, the export incentive received under the same schemer was held to be a capital receipt in A.Y. 2013-14. The SLP against this decision also stands dismissed by the Hon’ble Apex Court. He has further submitted that in the A.Y. 2014-15, the assessee’s appeal has been allowed by the co-ordinate bench on the same issue in ITA No.1231/Del/2019. Ld. AR has also relied on several other decisions of the co-ordinate benches in support of his claim.
On the other hand, Id. DR has strongly relied on the orders of the lower authorities and placed reliance on the decision of the Hon'ble Apex Court in Goetze India Ltd. (supra) to argue that since the claim was not made in the original return nor any revised return was filed, therefore, the same has been rightly rejected by the Id. AO and Id. CIT(A).
We have heard the rival submissions and perused the material on record. We note that the assessee had made the said claim by filing a letter during the course of assessment proceedings. While the Id. AO relied on the decision of the Hon'ble Apex Court in Goetze India Ltd. (supra), to reject the additional claim, we are of the considered view that the same sought to have been examined by the Id. CIT(A) during the appellate proceedings.
We further note that the same is decided in assessee's favour in the immediately succeeding assessment year by the co-ordinate bench in similar facts and circumstances. In ITA No. 1231/Del/2019 for A.Y. 2014-15, the co-ordinate bench has allowed the claim and held as under:
"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 exchange) under FPS when exported to the Linked Markets (countries), which are not covered in the present FMS list, as notified in Appendix 37D of HBPV, for exports made from 27.08.2009 onwards."
49.We have also examined the para no. 3.15.3 of the scheme document of the Foreign Trade Policy of Government of India, Ministry of Commerce and Industry wherein it was specified that market linked focus products scripts (MLFPS) is meant for export of products of high export intensity employment potential would be incentivized at 2% of FOB value of exports in free Foreign Exchange under FPS when exported to the linked market countries.
50.Thus, 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. in ITA No. 47/MDS./2016 dated 17.05.2016. 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. 306 ITR 392. The relevant part of the order is as under: (Factual matrix)
'2. ... the assessee submitted that the assessee received Market Linked Focus Product Scheme scrips on export of knitted garments. The Market Linked Focus Product Scheme was given @ 2% of the FOB value for export to potential new markets and not for all the markets. According to the Id. Representative, this is an incentive given for exploring new market on a long term perspective. The potential markets will be identified by the Government and the samples will be sent for exploring the markets. The assessee is engaged in the manufacturing of hosiery garments, therefore, exported hosiery garments to South American countries.
(Operative part of the decision)
9.We have considered the rival submissions on either side and also perused the material available on record. The Market Linked Focus Product Scheme is a scheme promoted by the Director General of Foreign Trade wherein incentive @ 2% on the FOB value of the total export was allowed. As per the Scheme, the incentive was given to export products in a specified market. The export of products which are covered under FPS list would be given incentive of 2% on FOB value of the export. In other words, it is an incentive given by 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, hence it cannot be treated as income either u/s 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."
51.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 assessed is to be treated as capital receipt only. Hence, we hereby allow the plea of the assessee on this ground."
Since the facts and the issued involved in the present year are identical, respectfully following the decision of the co- ordinate bench, we direct the Id. AO to allow the claim of the assessee and to treat the incentive received in this year under FPS as a capital receipt.
In the result, appeal of the assessee is allowed.