ACIT Vs Sangam (India) Ltd. (ITAT Mumbai)
Summary: Sangam (India) Ltd. had included ₹5,95,46,449 received under the Merchandise Exports from India Scheme (MEIS) in its return of income. It later argued that the inclusion was a mistake: the incentive was, in its view, a capital receipt that should be excluded both from taxable income under the normal provisions and from book profit under section 115JB. The Commissioner (Appeals) accepted that claim.
On the Revenue’s appeal, the Mumbai Tribunal reversed the MEIS finding. Following the Mumbai Special Bench decision in Aarti Drugs Ltd. v. ACIT, it held that the incentive was a revenue receipt taxable under the normal provisions and includible in book profit under section 115JB. The word “reward” used in the scheme did not determine its tax character.
How the Claim Reached the Tribunal
Sangam (India) Ltd. was engaged in manufacturing textile products and generating power. For AY 2020–21, it filed a return declaring income of ₹16,73,69,620 under the normal provisions and book profit of ₹20,30,46,844 under section 115JB. The ₹5.95 crore MEIS incentive was included in its returned income.
The return was processed under section 143(1), followed by an order under section 154. That rectification order dealt with several matters, including deferred tax and credits for advance tax, TDS and TCS. The assessee also sought to remove the MEIS amount from income and book profit, saying it had been offered to tax inadvertently. That request was not accepted in the rectification order.
