Export cash compensatory support is taxable income and not a capital receipt under the Income-tax Act.

Cash compensatory support received against exports is treated as taxable income, not a non-taxable capital receipt. The Finance Act, 1990 retrospectively amended section 2(24) and section 28 of the Income-tax Act to include export cash assistance within the definition of income and to charge it under the head "Profits and gains of business or profession." As a result, under sections 2(24)(vb) and 28(iiib), such export incentive receipts are liable to income-tax from the date of their introduction, regardless of the label used for the payment.

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Issues: Whether cash compensatory support received against exports was a capital receipt not liable to tax, or a taxable income under the Income-tax Act, 1961.

Analysis: The amendment made by the Finance Act, 1990 inserted clauses in section 2(24) and section 28 with retrospective effect, bringing cash assistance received against exports within the definition of income and charging it under the head "Profits and gains of business or profession". In view of section 2(24)(vb) and section 28(iiib), such export incentive receipts were made chargeable to income-tax from the date of their introduction.

Conclusion: Cash compensatory support, by whatever name called, is taxable and cannot be treated as a non-taxable capital receipt.

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