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Delhi High Court
Commissioner Of Income Tax & Anr. vs Banaras House Ltd. on 30 August, 2000
Equivalent citations: (2000) 163 CTR Del 462
Author: C Arijit Pasayat

ORDER

Arijit Pasayat, C. J.

In this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), the only question raised by the revenue is whether the Tribunal Delhi, Bench-A was )justified in holding that the amount, received by assessee on account of forfeiture of advance guarantee commission is business income and not income for other sources in terms of section 28(iiia) of the Act.

2. Background facts, which are almost undisputed, are essentially as follows :

2. Background facts, which are almost undisputed, are essentially as follows :

For the assessment year 1989-90 the assessee, a limited company, filed its return, inter alia claiming that the sum of Rs. 3,05,165 received as advance guarantee commission from M/s Jain Sudh Vanaspati Ltd. by written agreement dated 30-3-1982, was income from business. Assessing officer, while computing the total income, reduced the aforesaid amount from the net profits as disclosed in the Profit & Loss account, without disclosing any reason but under the broad heading “income under the head “other sources” for separate consideration”. The amount of Rs. 3,05,165 was a part of a sum of Rs. 7,69,18,390 which was deducted under the aforesaid head and it was added as income from other sources. At the cost of repetition we may indicate that the reason for coming to the conclusion that the income was not from business but was from other sources was not indicated in the order of assessment. The matter was carried in appeal before the Commissioner (Appeals) who upheld the actions of the assessing officer holding that on consideration of the nature of the receipt the same does not relate to business activity of the assessee and has been correctly treated as income from other sources. The matter was carried in further appeal before the Tribunal. With reference to section 28(iiia) which was made operative with effect from 1-4-1962, retrospectively by the Finance Act, 1990, it was held that amount in question constituted income from business and not from other sources. Accordingly assessee’s contention was accepted and assessing officer was directed to treat the same as income from business of the assessee.

3. In support of the appeal learned counsel for the revenue placed strong reliance on decision of the Apex Court in CIT v. Sterling Foods (1999) 237 ITR 579 (SC). Learned counsel for the assessee on the other hand, submitted that the provision itself is very clear to the effect that profits on sales of a licence granted under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947, is a part of the business income.

3. In support of the appeal learned counsel for the revenue placed strong reliance on decision of the Apex Court in CIT v. Sterling Foods (1999) 237 ITR 579 (SC). Learned counsel for the assessee on the other hand, submitted that the provision itself is very clear to the effect that profits on sales of a licence granted under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947, is a part of the business income.

4. It would be appropriate to quote section 28(iiia). Said provision reads as follows:

4. It would be appropriate to quote section 28(iiia). Said provision reads as follows:

Section 28. Profits and gains of business or profession : The following income shall be chargeable to income-tax under the head ‘Profits and gains of business or profession’:

xxxxx

(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947); ”

5. It is to be noted that along with section 28(iiia), section 2(24)(va) was introduced with effect from 1-4-1962. Said provision reads as follows .

5. It is to be noted that along with section 28(iiia), section 2(24)(va) was introduced with effect from 1-4-1962. Said provision reads as follows .

Section 2. Definition : In this Act, unless the context otherwise requires :

xxxxx

(24) ‘income’ includes

(va) any sum chargeable to income-tax under clause (iiia) of section 28.”

6. On a bare reading of the Sterling case (supra) it is clear that the same was rendered in a contextually different background. There the scope of section 80HHC vis-a-vis profits and sales of licence was in consideration. We find that section 28(iiia), having retrospective effect from 1-4-1962, as quoted above, makes the position clear that the profits on sales of a licence granted under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947, are chargeable to income-tax under the head “Profits and gains of business”. Undisputedly sale of the licence, which was subject-matter of consideration, was under the Imports and Exports Control Act, 1947, and was a licence issued under the Import Control Order, 1955. In view of the said position we are of the view that Tribunal was justified in its conclusion. That being the position we do not entertain this appeal. Dismissed.

6. On a bare reading of the Sterling case (supra) it is clear that the same was rendered in a contextually different background. There the scope of section 80HHC vis-a-vis profits and sales of licence was in consideration. We find that section 28(iiia), having retrospective effect from 1-4-1962, as quoted above, makes the position clear that the profits on sales of a licence granted under the Import (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947, are chargeable to income-tax under the head “Profits and gains of business”. Undisputedly sale of the licence, which was subject-matter of consideration, was under the Imports and Exports Control Act, 1947, and was a licence issued under the Import Control Order, 1955. In view of the said position we are of the view that Tribunal was justified in its conclusion. That being the position we do not entertain this appeal. Dismissed.


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