TMI Blog1978 (4) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... to sell it to any other manufacturer who manufactured products covered by the scheme. Under the said scheme the assessee-firm exported aluminium chains, in lieu of which it was granted certain import entitlements. Those import entitlements were sold by the assessee to other manufacturers during the relevant years for the following amounts : Rs. 1966-67 64,743 1967-68 61,142 1968-69 60,036 1969-70 15,886 This gave rise to the question before the Income-tax Officer as to whether the above receipts were taxable in the hands of the assessee. The lncome-tax Officer held that these receipts accrued to the assessee as a result of business activities carried on by it. He observed that had the assessee not sold the import entitlements, it would have availed the same. He rejected the claim of the assessee that the receipts received were capital in nature and that the same were not liable to tax on the basis of trading receipts. In this view of the matter, the Income-tax Officer held that the amounts received in the aforesaid four years were liable to tax. The assessee preferred four appeals to the Appellate Assistant Commissioner. The appeal for the assessment year 1966 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the accounting years relevant to the assessment years 1966-67, 1967-68, 1968-69 and 1969-70, respectively, were capital receipts ? 2. If the answer to question No. 1 is in the negative, whether the said sums were taxable in the hands of the assessee either as profits and gains of business or as benefit under section 28(iv) of the Income-tax Act, 1961 ? " For the sake of convenience, we propose to take up question No. 2 first. As indicated above, the assessee exported aluminium chains under the Special Export Promotion Scheme for Engineering Goods in the assessment years in question. The scheme was formulated by the Government of India under section 3 of the Imports and Exports (Control) Act, 1947. Under section 3 of the aforesaid Act, the Central Government is entitled to make an order controlling import and export. It appears that in exercise of the powers under section 3, the Special Export Promotion Scheme for Engineering Goods had been formulated by the Government of India. Under paragraph 5 of this scheme the benefits which may be granted to a registered exporter have been enumerated. The benefits consist of : (a) Import entitlements : Against exports of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defined in the Act. It is, therefore, permissible to resort to the dictionary meanings of this word. The same is " a natural advantage or profit, which includes monetary advantage or monetary profits ". (See Black's Dictionary, 1951 edition). In the present case, the assessee exported aluminium chains to the foreign countries in accordance with the provisions of the scheme for import of engineering goods. As noted above, the assessee was a firm carrying on the business of manufacture of iron bars, aluminium chains and wires. It was in connection with this business that it exported aluminium chains and in lieu thereof obtained the import entitlements in the four assessment years. The assessee could either utilise the import entitlements for itself or sell the same in the market and obtain monetary benefits. In either event the assessee would have been entitled to benefits inasmuch as it was definitely an advantage or profit arising out of the business in which the assessee was engaged at the relevant time. By allowing the import entitlements the Government had allowed an additional facility to the assessee to give an import licence to another person if the assessee itself could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that after having exported goods up to the value of certain limit, an exporter is entitled to an import licence being issued to him, and that the same cannot be arbitrarily rejected. It is, therefore, not correct to say that the nature of the entitlement receipts was only a bounty. For the purposes of attracting clause (iv) of section 28 of the Income-tax Act, it is necessary that the benefit should arise from business. It would be seen that the advantage of receiving the entitlement originated from and was intimately connected with the business which the assessee was doing. In case the assessee would not have exported the goods under the Special Exports Promotion Scheme to the extent of the value mentioned therein, it would not have obtained the entitlements. It is thus clear that the entitlements sprang up or came into being because of the business which the assessee was doing. The dictionary meaning of the word " arise " given in the Chamber's Twentieth Century Dictionary as originate, to come into being, leaves no room for doubt that income from import entitlements had actually arisen from the assessee's business. It is not correct, as argued by the learned counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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