MEIS Scrip Sale Proceeds Capital Receipts, Not Taxable: ITAT Chennai

By CA Sandeep Kanoi Income Tax Judiciary September 20, 2026

ACIT Vs Eastman Exports Global Clothing Pvt. Ltd. (ITAT Chennai)

Summary: The Chennai Bench of the ITAT disposed of a bunch of eight appeals involving the Department and different assessees for AYs 2017-18, 2018-19 and 2020-21. The Revenue’s lead appeal, ITA No. 3326/Chny/2019 for AY 2017-18, concerned the tax treatment of benefits arising from export incentive schemes, principally the sale of scrips under the Market Linked Focus Product Scheme (MLFPS)/Merchandise Exports from India Scheme (MEIS), and expenditure on construction of a building on leasehold land. The Tribunal noted that the Assessing Officer had treated the MLFPS receipts as taxable business income, while the CIT(A) had allowed the assessee’s claim based on earlier Tribunal orders in the assessee’s own case.

On the MLFPS/MEIS issue, the Revenue relied on section 2(24)(xviii), inserted by the Finance Act, 2015 with effect from 01.04.2016, and on section 28, contending that the export incentive was income. The Revenue also relied on Serum Institute of India (P.) Ltd. v. Union of India, Hyundai Motor India Ltd. v. ACIT and other decisions. The assessee contended that the benefit under the Foreign Trade Policy-2015 was a “reward”, not the “assistance” contemplated by section 2(24)(xviii), and relied on the purpose-test decisions including CIT v. Ponni Sugars & Chemicals Ltd. and the Tribunal’s own earlier orders in the assessee’s case.

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