Orient Novelties (P.) Ltd. vs Commissioner of Income Tax

R.C. Lahoti, J.—These are two references u/s 256(1) of the income tax Act, 1961 (�the Act�) made at the instance of the assessee arising out of the assessment years 1977-78, 1978-79 seeking opinion of the High Court on the following common question :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sale proceeds of the import entitlement is a trading receipt or in any case profits and gains of business u/s 28(iv) of the Act and as such taxable ?"

The plea raised on behalf of the assessee 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 favour with the Tribunal and the premium earned by the assessee has been held liable to tax.

However, as pointed out by the 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 licence 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, 1990, have been given a retrospective effect from 1-4-1962. The assessment year 1974-75 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 assessee is liable to be taxed �income� as 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.