- (1.) IN the present appeal filed under Section 260A of the Income -tax Act, 1961 (hereinafter referred to as 'the Act'), the Revenue submits that the order of the Income -tax Appellate Tribunal dated June 9, 2005, involves the following substantial questions of law: Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the incentive received by the assessee by way of additional quota for free sale of sugar under the Sampat scheme as capital receipt. Whether, on the facts and in the circumstances of the case, the amount of incentive received by the assessee could be taxed under Section 28(iv) of the Act?
(2.) THE appeal relates to the assessment year 1994 -95. Before the Assessing Officer, the respondent -assessee which is engaged in the business of manufacture and sale of sugar, claimed that the sum of Rs. 2,50,82,052, represents capital receipt as it was towards incentive received under the scheme formulated by the Central Government for recoupment of capital employed and repayment of loans taken from the financial institution for setting up a new sugar factory/expansion. The Assessing Officer did not agree with the submission and, accordingly treated it to be revenue receipt. However, in the appeal preferred by the respondent -assessee before the Commissioner of Income -tax (Appeals), Lucknow, the plea had been accepted. The Commissioner of Income -tax (Appeals) has found as follows: In the instant case, the very right to receive the excess price and the excess excise duty was based on the obligation to recoup the capital employed, since the amount could not have been received without that obligation, there was a clear nexus and consequently a diversion of income. Hence, from any point of view the amounts received took the nature of capital receipt by reason of the incentive scheme and thus, could not be treated as part of the assessee's income. The Revenue filed an appeal before the Tribunal and the Tribunal had dismissed the appeal following its earlier order passed in the case of the other assessee, which are also engaged in the manufacturer of sugar wherein the similar scheme was under consideration.
(3.) WE have heard Sri A. N. Mahajan, learned standing counsel for the Revenue and Sri Shakeel Ahmad, learned Counsel appearing for the respondent -assessee.;