ORDER
B. R. ARORA, J. :
The Tribunal, Jaipur Bench, Jaipur, at the instance of the Revenue, under s. 256(1) of the IT Act, has referred the following questions of law for the opinion of this Court :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in directing the ITO to allow the deduction under s. 80HH of the IT Act, 1961 without deducting the carry forward losses and investment allowance ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that cash compensatory receipt for export cannot be treated as revenue receipt for taxation.”
2. The identical question came up for consideration before us in CIT vs. Vishnu Oil & Dal Mills DB IT Ref. No. 1 of 1991 decided on 13th Nov., 1995 [since reported at (1996) 132 CTR (Raj) 132] in which we have answered the first question as follows :
“If we read s. 80HH with s. 80AB of the Act then it is very much clear that for the purpose of determination of the relief under s. 80HH of the Act, the gross total income of the assessee has to be worked out after deducting unabsorbed loss and unabsorbed depreciation and the income eligible for deduction under s. 80HH will be the net income as computed in accordance with the provisions of the Act and not the gross income.”
The first question is, therefore, answered in favour of the Revenue and against the assessee.
3. So far as the question No. 2 is concerned, after the reference made by the Tribunal, the law on the point has been amended and an Explanatory Note on the provisions of the Finance Act, 1990 was issued modifying the provisions relating to exemption of income from export. The Circular No. 572, dt. 3rd Aug., 1990 [printed at (1990) 87 CTR (St) 1] issued in this regard reads as under :
Explanatory Notes on the provisions of the Finance Act, 1990 – Modifications of provisions relating to exemption of income from exports :
27.1 At present exporters are given incentives by way of Cash Compensatory Support (CCS), drawback of duty and import entitlement licences. The taxation of CCS has been a subject matter of litigation. The Calcutta High Court in the case of Jeevan Lal (1929) Ltd. vs. CIT (1983) 142 ITR 448 (Cal) held that the CCS received by an exporter was a revenue receipt and was subject to income-tax. The Special Bench of the Tribunal has, however, in a case, distinguished the aforesaid decision and came to the conclusion that the CCS was a capital receipt and, hence, not subject to tax. The Departments view all along has been that CCS or any other subsidy received by an exporter as an export incentive is a revenue receipt and, hence, taxable.
27.2 Similarly, the Departments view as regards drawback of duty and profit on sale of import entitlement licences has been that these are revenue receipt and, hence, liable to tax. There are many Court decisions supporting this view.
27.3 To put an end to litigation which may arise regarding the taxability of these incentives received by exporters, new cls. (iiia), (iiib) and (iiic) have been inserted in s. 28 of the IT Act to provide that profit on sale of import entitlement licences, CCS and drawback of duty respectively shall be chargeable to income-tax under the head “profit and gains of business or profession”. These have, further, been included in the definition of the term income in cl. (24) of s. 2.
27.4 These amendments will take effect retrospectively from the dates from which these incentives were introduced. Thus, amendment with regard to profit on sale of import entitlement licences will apply from 1st April, 1962; cash assistance from 1st April, 1966 and drawback of duty from 1st April, 1972 and will, accordingly, apply in relation to the asst. yrs. 1962-63, 1967-68 and 1972-73 respectively, and subsequent years.”
3. In view of the amendment made in the taxing provision regarding the taxability of these incentives received by the exporters, new cls. (iiia), (iiib) and (iiic), have been inserted in s. 28 of the IT Act to provide that the profit on sale of import entitlement licences, CCS and drawback of duty respectively shall be chargeable to income-tax under the head “profits and gains of business or profession”. These have, further, been included in the definition of the term income in cl. (24) of s. 2, it is not necessary to go into the merits of the case. The law has been amended with retrospective effect from the dates from which these incentives were introduced. In view of the amended provisions of s. 28 of the Act relating to exemption of income from exports (item No. 27.3 above) this question is, also, answered in favour of the Revenue and against the assessee.
4. In the result, the reference is answered in favour of the Revenue and against the assessee.