1982 (4) TMI 140 - AT - Income Tax

Summary

Issues:
Assessment of income from sales of import entitlements as business income under section 28(iv) of the Income-tax Act, 1961.

Analysis:
The case involved the assessment of income from the sale of import entitlements by the assessee as business income under section 28(iv) of the Income-tax Act, 1961. The Income-tax Appellate Tribunal (ITAT) Delhi-C considered the arguments put forth by both the assessee and the departmental representative. The assessee claimed that the income from the sale of import entitlements should be treated as a capital receipt and not taxable. However, the departmental representative contended that the import entitlements were a trading receipt and constituted business income. The ITAT analyzed the facts of the case, including the nature of the import entitlements and the scheme under which they were granted to exporters.

The ITAT referred to previous decisions such as Agra Chain Manufacturing Co. v. CIT, Kesoram Industries & Cotton Mills Ltd. v. CIT, and Addl. CIT v. Abbas Wazir (P.) Ltd., which supported the view that income from the sale of import entitlements should be treated as business income assessable under section 28(iv) of the Act. The ITAT also considered the Import Trade Control Policy and the purpose of granting import entitlements to exporters. It noted that the import entitlements were directly connected to the business activities of the assessee, which involved manufacturing and exporting carpets.

The ITAT observed that the import entitlements were obtained by the assessee as a result of its export activities and were an integral part of its business operations. The import entitlements were granted under a structured scheme to facilitate the import of materials required for manufacturing products exported by the assessee. The ITAT concluded that the premium received by the assessee from the sale of import entitlements constituted business income assessable under section 28(iv) or 28(i) of the Act.

Furthermore, the ITAT distinguished the decisions relied upon by the representative for the assessee, emphasizing that those cases were not directly applicable to the present situation. The ITAT upheld the decisions of the tax authorities regarding the treatment of income from the sale of import entitlements as business income. In summary, the ITAT ruled in favor of considering the income from the sale of import entitlements as business income assessable under the relevant provisions of the Income-tax Act, 1961.