1. This appeal by the asses-see relates to the assessment year 1980-81.
The assessee is a registered firm consisting of two partners. The business run was that of an exclusive retail shop of Bombay Dyeing & Manufacturing Ltd. Supplies of cloth were obtained by the assessee through the wholesale distributors of Bombay Dyeing and Mfg. Co. Ltd. (the principals), i.e., Shivram Associates (the distributors). In the year of account, the assessee received an amount of Rs. 50,000, which was equivalent to the cost of an Ambassador car from the principals.
The principals had celebrated the centenary year and in that connection had brought out a Suiting Incentive Scheme under which the assessee received the aforesaid amount. Extracts from the relevant pamphlet containing the details of the incentive scheme are as under: Bombay Dyeing has recently introduced several new and exciting varieties in its range of Polyester and Polyester-blended suitings...we can thus offer discriminating customers a truly extensive selection of exclusive suitings like...
... to enable you to stock and sell more of these fabulous suitings, we offer Bombay Dyeing Retailers a host of incentives like: An opportunity to pick and choose the varieties and designs your customers ask for most.
We want you to put in a little extra effort, to try and sell Bombay Dyeing Suitings. And now, to make it worth your while We offer you gifts galore. Naturally, the more Bombay Dyeing Suitings you stock and sell, the more attractive the gifts you will get.
From 1st December, 1978 to 30th November, 1979, on your total purchase of Bombay Dyeing Suitings worth Rs. 75,000 or more from any of our approved wholesale dealers you will be entitled to the exciting gifts detailed below: To match the quantity of purchases, various gifts were offered. The minimum purchase for eligibility for gift was Rs. 75,000 and the maximum purchase was for Rs. 8 lakhs or more. The assessee-firm became eligible because of the purchase of Polyester suitings worth Rs. 8 lakhs. The gifts permissible under this category were: 35 days' package tour of the USA and Europe (for 2) or Ambassador car or cash register, ply-Fedders-Lloyd 3 ton air-conditioner or various other items like refrigerator, typewriter, etc., etc.
The assessee received in lieu of the Ambassador car, the amount of Rs. 50,000. In this regard it would also be relevant to set out the assessee's letter dated 10-12-1979 to the distributors: We are pleased to inform you that we have purchased Bombay Dyeing Suitings for Rs. 8,00,540.63 during the period 1-12-1978 to 5-12-1979. A statement showing invoice-wise, the value of suitings purchased by us is enclosed for your records.
We take this opportunity to thank you for your co-operation in arranging timely supplies of suitings, which enabled us to achieve the target of Rs. 8 lakhs.
We once again thank you for all the efforts you have taken in making the gift scheme for suitings, a grand success.
The reply dated 1-3-1980 from the distributors to the assessee is as below: Your unstinted efforts coupled with personal qualities of high business skill have borne fruits. Our principal Bombay Dyeing & Mfg.
Co. Ltd., Bombay, expressed great appreciation for your indefatigable endeavour in achieving the targets of purchases as fixed by them and in appreciation of your efforts to boost up suiting sales, you are offered one Ambassador car of your choice under Mill's Gift Scheme. This gift, is no doubt, purely in recognition of your personal qualities and a fine team effort.
2. In filing the return originally, the amount of Rs. 50,000 was not shown ; but a revised return was filed claiming the amount as exempt from taxation. The ITO observed that the receipt was foreseen and anticipated and, therefore, could not be considered as casual or non-recurring to be eligible for exclusion under Section 10(3) of the Income-tax Act, 1961 ('the Act'). The ITO, therefore, included the amount of Rs. 50,000 in making the assessment.
3. The assessee appealed and reiterated before the AAC the stand that the amount was not taxable. The assessee relied on the decision of the Tribunal (Madras Bench 'B') in the case of Rasi Exports (P.) Ltd. v.ITO [IT Appeal No. 360 (Mad.) of 1980 dated 30-3-1981] as also the judicial pronouncements in CIT v. Ramalakshmi Reddy  131 ITR 415 (Mad.) and CIT v. Groz-Beckert Saboo Ltd.  116 ITR 125 (SC).
4. The AAC observed that the facts in the case of Rasi Exports (P.) Ltd.'s case (supra) were materially different and the value of collar turning machine was held to be exempt because the receipt of such a machine was never in contemplation at any stage prior to the receipt of the gift. Eventually, the AAC upheld the inclusion of the amount of Rs. 50,000.
5. Before us, the learned counsel for the assessee again relied on the order of the Tribunal in the case of Rasi Exports (P.) Ltd. (supra) and the other judicial pronouncements on which reliance was placed before the AAC. It was reiterated that the receipt was a capital receipt and in the nature of a bounty or gift and could not be subjected to tax.
6. The learned departmental representative, on the other hand, submitted that there was a direct nexus between the receipt of the amount and the business carried on by the assessee and the amount was clearly taxable under the provisions of Section 28 of the Act, and in particular, the provisions of Section 28(iv).
7. We have considered the rival submissions. From the facts set out, it is clear that in the present case, to mark the centenary of the principals, they had come out with a scheme offering incentives or prizes. Such incentives or prizes were based on the amount of purchases that a particular retailer made. The larger the purchases made, the larger the incentive offered. Therefore, before embarking on the purchases, the assessee was aware that if certain specific targets were exceeded they would become eligible for the gifts which were offered under the gift scheme. The business, therefore, was carried on by the assessee in a manner in order to enable the maximum possible purchases being made. The purchases exceeded Rs. 8 lakhs and the assessee became entitled to the gift. From the facts ascertained, the crucial point which emerges is that the purchases made were for the benefit of the business, and in making such purchases, the assessee obtained the gift.
The purchases were made with the expectation of obtaining the gift. The gift obtained by the assessee was as much a reward for good business done as incentives obtained in the form of import licences, etc., under the export promotion scheme and in such cases Courts have uniformly held that the value thereof was taxable. The decision in this regard are Kesoram Industries & Cotton Mills Ltd. v. CIT  115 ITR 143 (Cal.) and CIT v. Swadeshi Cotton Mills Co. Ltd.  121 ITR 747 (All.), etc. The ratio of the order of the Tribunal in the case of Rasi Exports (P.) Ltd. (supra) has no application here because there, when goods were exported, the assessee had no knowledge that the foreign customer would send them gifts of collar turning machine. The Tribunal has clearly pointed out in para 4 of its order that the receipt of such a gift was never in contemplation at any stage and further in para 5 they have stated that there was no material to show that the machine was received in pursuance of an agreement either tacit or written. The decision of the Supreme Court in the case of Groz-Beckert Saboo Ltd. (supra) has also no application to the facts in the present case. This is not a case where the gift has been received as a capital asset unlike in that case where the gifts were received along with certain machinery supplied for setting up a factory in India. For all the aforesaid reasons, we hold that the amount of Rs. 50,000 has rightly been brought to tax.