Retrospective treatment of import entitlement proceeds as business income, and denial of weighted deduction for domestic transport charges

Retrospective insertion of section 28(iiia) and section 2(24)(va) brought profits on sale of import entitlements within business income for the relevant assessment year, so the amount was assessable as business income. Expenditure limited to transportation of goods within India up to the port did not fall within the scope of weighted deduction under section 35B, so the deduction was unavailable. Both questions were answered against the assessee.

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Issues: (i) Whether the sale value of nominations obtained against import entitlements was assessable as business income for the assessment year 1980-81. (ii) Whether transportation charges incurred within India up to the port qualified for weighted deduction under section 35B.

Issue (i): Whether the sale value of nominations obtained against import entitlements was assessable as business income for the assessment year 1980-81.

Analysis: The retrospective insertion of clause (iiia) in section 28 and clause (va) in section 2(24) by the Finance Act, 1990 brought profits on sale of import entitlements within the ambit of income chargeable under the head "Profits and gains of business or profession". As the amendment was made operative from 1 April 1962, it governed the assessment year in question.

Conclusion: The amount was assessable as business income, in favour of the Revenue and against the assessee.

Issue (ii): Whether transportation charges incurred within India up to the port qualified for weighted deduction under section 35B.

Analysis: Expenditure confined to movement of goods within India is not eligible for weighted deduction under section 35B as it stood at the relevant time. The deduction is unavailable where the spending is purely domestic transportation expenditure and not of the kind contemplated by the provision.

Conclusion: The transportation charges did not qualify for weighted deduction, in favour of the Revenue and against the assessee.

Final Conclusion: Both referred questions were answered against the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: A retrospective amendment expressly including a receipt within business income applies to the relevant assessment year, and domestic transportation expenditure incurred within India is not eligible for weighted deduction under section 35B.

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