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1995 (11) TMI 50 - HC - Income TaxBusiness Income Cash Compensatory Support Industrial Undertaking Revenue Receipt Special Deduction Unabsorbed Depreciation
Issues:
1. Whether the Income-tax Appellate Tribunal was justified in directing the Income-tax Officer to allow the deduction under section 80HH without deducting carry forward losses and investment allowance? 2. Whether the cash compensatory receipt for export can be treated as a revenue receipt for taxation? Analysis: Issue 1: The court considered the first question regarding the deduction under section 80HH of the Income-tax Act. The court referred to a previous case where it was clarified that for the purpose of determining relief under section 80HH, the gross total income must be calculated after deducting unabsorbed losses and unabsorbed depreciation. The net income, as computed according to the Act, is eligible for deduction under section 80HH, not the gross income. Therefore, the court answered this question in favor of the Revenue and against the assessee. Issue 2: Regarding the second question on the treatment of cash compensatory receipt for export as a revenue receipt for taxation, the court noted that the law had been amended with retrospective effect. The amendments included new clauses in section 28 of the Income-tax Act, specifying that profit on the sale of import entitlement licenses, cash compensatory support (CCS), and drawback of duty shall be chargeable to income tax under the head "Profits and gains of business or profession." These amendments were made to end litigation regarding the taxability of export incentives. The court, therefore, concluded that in light of the amended provisions, the question was answered in favor of the Revenue and against the assessee. In conclusion, the court ruled in favor of the Revenue and against the assessee on both issues. The judgment provided clarity on the deduction under section 80HH and the tax treatment of export incentives, emphasizing the retrospective amendments made to the Income-tax Act.
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