TMI Blog2021 (3) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the prescribed format. The communication in form 3CL was thereafter, between the prescribed authority and the department. If the same was not so surely the assessee cannot be made to suffer. To this extent the Tribunal was perfectly correct and the Commissioner was not, in observing that in absence of such certification, claim of deduction under Section 35(2AB) was not available. Tribunal in the case of Century Seeds Pvt. Ltd. Vs DCIT [ 2018 (8) TMI 663 - ITAT HYDERABAD ] held that AO has correctly allowed the deduction and there is no error in the order passed by AO u/s 143(3). Once a research facility is approved entire expenditure incurred on department of R D has to be allowed weighted deduction as provided u/s 35(2AB). Relying on the case of DCIT Vs Famy Care Ltd. [ 2014 (11) TMI 987 - ITAT MUMBAI ] on the same facts, the Tribunal in the case of Efftronics Systems Pvt. Ltd. [ 2016 (11) TMI 1251 - ITAT VISAKHAPATNAM ] laid down the proposition that in case Form 3CL is not available, the appellant should not be penalized and weighted deduction cannot be denied. Similarly, the ITAT Mumbai Bench in the case Mahindra Mahindra Ltd. Vs DCIT [ 2013 (9) TMI 522 - ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Education Cess as per the provisions of Section 37. Incentive under Foreign Trade Policy - assessee has received incentive under Focus Product Scheme (FPS) from Government of India for exports of goods - HELD THAT:- 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. [ 2016 (7) TMI 951 - ITAT CHENNAI ] 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. [ 2008 (9) TMI 14 - SUPREME COURT ] Thus MLFPS received by the assessed is to be treated as capital receipt only . Appeal of the assessee is allowed. - ITA No. 1231/Del/2019 (Asstt. Year: 2014-15) - - - Dated:- 2-2-2021 - Sh. Bhavnesh Saini, Judicial Member And Dr. B. R. R. Kumar, Accountant Member Assessee by: Sh. Sandeep S. Nagar, CA Revenue by: Sh. Prakash Dubey, Sr. DR ORDER Per Dr. B.R.R. Kumar, Accountant Member: The present a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00708 and the recognition is continuing till date without any interruption and regularly submitting requisite information to DSIR in form 3CK year after year. He has produced the copy of the renewals issued by DSIR dated 19.05.2015 granting renewal of recognition upto 31.03.2021 which are as under: Dated: 19th May, 2015 To, M/s Bharat Rasayan Ltd., 1501, Vikram Tower, Rajendra Place, New Delhi-110008 Subject: Renewal of Recognition of in-house R D Units(s) Dear Sirs, This has reference to your application for renewal of recognition of your In-House R D unit(s) beyond 31.03.2015 by the Department of Scientific and Industrial Research. 2. This is to inform you that it has been decided to accord renewal of recognition to the In-House R D unit(s) of your firm at 2 K.M. Stone Madina Mokhra Road, Village Mokhra, Tehsil Meham, Distt. Rohtak (Haryana) upto 31.03.2018. Terms and conditions pertaining to this recognition are given overleaf. 3. Kindly acknowledge the receipt of this letter. Yours faithfully, Sd/- (K.V.S.P. Rao) Scientist G Dated: 24th April 2018 To, M/s Bharat Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure which is to be allowed and given benefit to, the assessee has onerous responsibility to prove that such expenditure is allowable. It was argued that the assessee failed to submit Form 3CL which is a prerequisite for claiming of deduction u/s 35(2AB). It was also argued that allowing of such expenditure in the earlier year and the subsequent year doesn t give any right to allow the deduction during the current year. 13. Heard the arguments of both the parties and perused the material available on record. 14. The moot issue to be decided by us is whether the claim for deduction u/s 35(2AB) in the absence of submission of Form 3CL by the assessee is allowable or not. 15. We are guided by the overall facts and circumstances of the assessee on this issue, we find that the assessee has submitted all the documents necessary to prove the claim of deduction u/s 35(2AB). The assessee has submitted Form 3CK for entering into an agreement with DSIR for R D facility along with audit statement and DSIR issued letter stating recognition of In-House R D units from 31.03.2012 to 31.03.2015 and thereafter till 31.03.2018 and upto 31.03.2021. From the perusal of said certificates, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case Mahindra Mahindra Ltd. Vs DCIT in ITA No. 8597/Mum/2010 order dated 06.06.2012 wherein it was held that while deciding the issue related with benevolent provisions like 35(2AB), liberal and practical approach should be followed. 21. Hence, keeping in view the entirety of the facts and peculiar circumstances of the instant case, we hold that the assessee should not be shorned of the legal right bestowed upon by the provisions of the Income Tax Act. The revenue may disallow the claim of the asseseee if it can prove that the claim of the assessee is wrong after obtaining the report in Form 3CL from the concerned authority. The matter is being sent back to the file of the Assessing Officer. Education Cess: 22. The assessee has taken up additional grounds pertaining to deduction of Education Cess before the ld. CIT (A). The ld. CIT (A) did not allow the grounds holding that it doesn t emanate from the assessment order. 23. Before us, it was argued that a legal ground can be taken up any time before the higher authorities. The ld. AR relied on the judgment of the Hon ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383. Admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 7. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide, e.g., C.I.T, v. Anand Prasad (Delhi), C.I.T. v. KaramchandPremchand P. Ltd. and C.I.T. v. Cellulose Products of India Ltd. . Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CBDT vide Circular No. 91/58/66 ITJ(19) clarified as under: Interpretation of provisions of Section 40(a)(ii) of the I.T Act clarification regarding. Section 40(a)(ii) Recently a case has come to the notice of the Board where the ITO has disallowed the cess paid by the assessee on the ground that there has been no material change in the provisions of Section 10(4) of the old Act and Section 40(a)(ii) of the new Act. 2. The view of the ITO is not correct. Clause 40(a)(ii) of the IT Bill, 1961 as introduced in the Parliament stood as under: (a) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. When the matter came up before the Select Committee, it was decided to omit the word cess from the clause. The effect of the omission of the word cess is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided. 33. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word 'Cess' is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. 38. Further, we are guided by the judgment of the Constitutional bench which was also referred in the case of Dewan Chand Builders Contractors Vs Union of India Others in Civil Appeal No. 1830 of 2008 dated 18.11.2011. 39. The Constitution Bench of this Court in Hingir Rampur Coal Co. Ltd. Vs. State of Orissa2 was faced with the challenge to the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, levying Cess on the petitioner's colliery. The Bench explained different features of a `tax', a `fee' and `cess' in the following passage: The neat and terse definition of Tax which has been given by Latham, C.J., in Matthews v. Chicory Marketing Board (1938) 60 C.L.R. 263 is often cited as a classic on this subject. A Tax , said Latham, C.J., is a compulsory exaction of money by public a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 42. From the above, we find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income Tax is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. That said incentive was given @ 2% of the FOB value for export to potential new markets and not for all the markets. 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. From the perusal of the Scheme, it can be seen that, incentive has been given with an objective to intensify and accelerate the process of dispersal of Industries. The ld. AR produced the copy of the said scheme to buttress is arguments. 46. On the other hand, the ld. DR argued that the incentives are in the nature of revenue as it is linked to the percentage of the FOB value for exports. Since, the FOB value is a trading implication any income arising out of such transaction has to be treated as revenue in nature. 47. Heard the arguments of both the parties and perused the material available on record. 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 expa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
