- (1.) The Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the IT Act, 1961 ('the Act') for opinion to this Court : 1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was legally correct in holding that the incentive of Rs. 2,10,67,677 received by the assessee by way of additional quota for free sale sugar which is directly connected with the business activities of the assessee, was on capital account and hence not taxable as a revenue receipt ?
(2.) Whether, on the facts and in the circumstances of the case, the learned Tribunal was legally correct in deleting the disallowance of Rs. 13,98,899 made under Section 43B in respect of unpaid production incentive bonus covered under Section 36(1)(ii) of the IT Act? 2. The reference relates to the asst. yr. 1990-91. Briefly stated, the facts giving rise to the present reference are as follows : The assessee is a cooperative society engaged in the business of manufacture and sale of sugar. For the year ending 31st March, 1990, relevant to the asst. yr. 1990-91, it filed its return on 16th Oct., 1990 declaring a loss of Rs. 4,00,64,360. In the P&L a/c total sales were shown at Rs. 15,20,83,667 which included an amount of Rs. 2,10,67,677 received as incentive earned from sale of sugar. The assessee gets this incentive by way of additional free sugar quota wherein excise duty is leviable at a reduced rate but the sugar is available for being sold at the market price. The resultant benefit is required to be used for repayment of term loans obtained from financial institutions for setting up the plant and other capital expenses in due time. This incentive scheme is based on the recommendation of the Sampat Committee report. While in the accounts the above receipt on account of incentive was treated as revenue receipt and formed part of the sales in appeal filed before the CIT(A) on other grounds, an additional ground was raised that the AO had erred in facts and in law in not treating the sum of Rs. 2,10,67,677 being the incentive received under the 'Sampat Incentive Scheme' by way of additional free sale of sugar quota as a capital receipt in the hands of the assessee. The CIT(A) obtained a report from the AO on the above issue who objected to the admission of the fresh grounds. However, CIT(A) admitted the fresh ground. After adjudicating the issue on merits, vide paras 4 and 5 of his order dt. 9th Feb., 1994, the C1T(A) rejected the objection of the assessee by observing that the benefit received by the assessee under the Sampat Scheme was in the nature of revenue receipt as it had not been received to meet out the capital cost.
(3.) Aggrieved by the order of CIT(A), the assessee filed an appeal before the Tribunal. The Tribunal has held that the said incentive received by the assessee was on capital account and that it was not taxable as a revenue receipt.;