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TMI Blog1997 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... was consumed internally by the assessee for manufacturing other products. The particulars of the products manufactured by the assessee utilising palm oil have not been given in the order of the Tribunal. The contention of the assessee is that the oil which was purchased by the assessee from foreign countries on the strength of the import entitlement was at a rate much lower than the rate obtaining in the Indian market for similar products. Since the assessee paid a lower price for the imported palm oil the assessee made a larger profit than what it would have made had it purchased palm oil locally at a higher rate. The assessee, therefore, would be entitled to benefit of section 2(5)(i) of the Finance (No. 2) Act, 1962, in respect of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or may not be the position in law. We do not have to decide this point in the instant case. Here, the assessee has not sold anything which he has imported. He has imported palm oil which he has utilised in manufacturing other products. It may be that at a particular point of time, palm oil was selling in a foreign country at a rate much lower than the rate obtaining in the local market. But purchasing something at a rate cheaper than the local market rate does not result in any profit. Profit arises from sale of goods. The question in this case is whether the assessee's total income includes "any profits and gains derived from export of any goods or merchandise out of India". The total income has to be computed in accordance with the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee how any of these three clauses comes to the aid of the assessee in any manner. Clause (iiia) speaks of profits on sale of a licence granted under the Imports (Control) Order ; clause (iiib) speaks of cash assistance received or receivable by any person against exports ; and clause (iiic) speaks of duty of customs which is not the case here. This argument can be described in the language of Lord Greene, M. R., in the case of Henriksen v. Gra on Hotel Ltd. [1942] 24 TC 453 (CA) at page 460 as an attempt to rescue the case from shipwreck. Unfortunately, as in that case before Lord Greene M. R., the attempt has been futile. We were referred to a large number of cases. We shall refer to some of them. In the case of CIT v. Wheel and Rim Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, we can refer to the decision of the Privy Council in the case of CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948] 16 ITR 325. In that case it was pointed out that the word "derived" is not a term of art. Its use in the definition demanded an inquiry into the genealogy of the product. But the Privy Council cautioned that the inquiry should stop as soon as the effective source is discovered, The question in that case was whether interest in respect of arrears of rent payable for land which was used for agricultural purposes would also be agricultural. The claim on behalf of the assessee was that since the rent was payable for agricultural land, the interest on delayed payment of such rent was also of agricultural character and was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word 'derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment." In the instant case, the immediate source of the profit is sale of goods. The export of other goods is not even the second degree but it has to be traced to an even more remote degree. The import was of palm oil. The import was possible because of earlier export of goods at a loss. In the chain of sequence the earlier export would be four degrees away. The decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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