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Issues:
1. Interpretation of cash compensatory support as a capital or revenue receipt for income-tax purposes. Analysis: The High Court of Rajasthan was presented with the issue of determining the taxability of cash compensatory support (CCS) received by an assessee. The Income-tax Appellate Tribunal referred the question of law to the court, questioning whether the CCS should be treated as a capital receipt or a revenue receipt for income-tax purposes. The court noted that there had been conflicting views on the taxability of CCS, with the Department considering it a revenue receipt subject to tax, while some judicial decisions, such as the Calcutta High Court and a Special Bench of the Tribunal, viewed it as a capital receipt not liable to tax. The court highlighted that subsequent to the reference made by the Tribunal, amendments were introduced in the taxing provisions regarding the treatment of incentives received by exporters, including CCS. New clauses were inserted in section 28 of the Income-tax Act, specifying that profit on the sale of import entitlement licenses, CCS, and drawback of duty would be chargeable to income tax under the head "Profits and gains of business or profession." These amendments were made effective retrospectively from the dates when these incentives were introduced. In light of the amended provisions and the clarity provided by the legislative changes regarding the taxability of CCS and other export-related incentives, the court concluded that it was unnecessary to delve into the merits of the specific case. The court held that the amended law, which categorically included CCS as income chargeable to tax, resolved the issue definitively. Consequently, the court ruled in favor of the Revenue and against the assessee, aligning with the amended provisions of section 28 of the Income-tax Act regarding the exemption of income from exports.
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