Cashmere Woollen and Silk Mills vs Commissioner of Income Tax

R.C. Lahoti, J.—This is a reference u/s 256(1) of the Income Tax Act, 1961, made at the instance of the assessed arising out of the assessment year 1982-85 seeking opinion of the High Court on the following question of law :

"Whether, on the facts and circumstances of the case, the Tribunal was legally justified in holding that the amount of Rs. 2,72,036 on account of import entitlements received by the assessed was assessable to Income Tax as business income ?"

The plea raised on behalf of the assessed was that the transfer of import entitlements amounted to transfer of source of income and, Therefore, should not be treated as revenue receipt. This plea did not find favor with the Tribunal and the premium earned by the assessed has been held liable to tax.

However, as pointed out by learned senior standing counsel for the Department, this reference has been rendered academic merely in view of the change in law made effective retrospectively. The Finance Act, 1990, has introduced Clause (iiia) in Section 28 of the Act according to which, proceeds of sale of license granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947, is income chargeable under the head "Profits and gains of business or profession". An amendment has also been effected in the definition of income in clause (24) of Section 2 of the interpretation clause of the Act whereby any sum chargeable under Clause (iiia) of Section 28 is included in the definition of "income". These amendments, though inserted by the Finance Act of 1990, have been given a retrospective effect from April 1, 1962. The assessment year 1974-75 (sic) is clearly covered by the amendment. Thus, whatever might have been the controversy earlier, the same does not survive for decision in view of the amendments referred to hereinabove, according to which the premium earned by the assessed is liable to be taxed as "income" under the head "Profits and gains of business or profession".

For the foregoing reasons, the reference is held to have been rendered academic merely and hence is returned unanswered.